UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





FORM
      10-K **/** A-1





(Mark
      One)





x
      ANNUAL REPORT PURSUANT
      TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934




For
      the
      fiscal year ended December 31, 2005




OR





o
      TRANSITION REPORT
      PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For
      the
      transition period from _________ to _________





Commission
      File Number: 0-23532





GLOBETEL
      COMMUNICATIONS CORP.


(Exact
      name of registrant as specified in charter)





Delaware
            
            88-0292161(State
                or other jurisdiction of incorporation)
            
            (I.R.S.
                Employer Identification No.)




101
        NE
        3rd Ave, Suite 1500, Fort Lauderdale, Florida
        33301


(Address
      of Principal Executive Offices) (Zip Code)





Issuer's
      telephone number: (954) 332-3759





Copies
      to:


Stephen
      M. Fleming, Esq.


Sichenzia
      Ross Friedman Ference LLP


61
      Broadway, 32 nd Floor


New
      York,
      New York 10006


Phone:
      (212) 930-9700


Fax:
      (212) 930-9725





Securities
      registered under Section 12 (b) of the Exchange Act:





Common
                Stock Par Value $.00001 per shareTitle
                of each class
            Name
                of exchange on which registered





Securities
      registered pursuant to Section 12 (g) of the Exchange Act:




Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 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. oNo: x





Indicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K (ss. 229.405 of this chapter) is not contained herein, and will
      not be contained, to the best of registrant's knowledge, in definite proxy
      or
      information statements incorporated by reference in Part III of this Form 10-K
      or any amendment to this Form 10-K. o





Indicate
      by check mark whether the registrant is an accelerated filer (as defined in
      Rule
      12b-2 of the Act). Yes oNo: x





State
      issuer's revenues for its most recent fiscal year ended December 31, 2005:
      $10,144,812.





As
      of
      December 4, 2007, there were 127,749,688  shares
      of
      the issuer's common stock issued and outstanding. Affiliates of the issuer
      own
      9,320,000 shares of the issuer's issued and outstanding common stock and the
      remaining 113,159,169 shares are held by non-affiliates. The aggregate market
      value of the shares held by non-affiliates at December 4, 2007, was
      $13,413,717.





DOCUMENTS
      INCORPORATED BY REFERENCE:





There
      are
      documents incorporated by reference in this Annual Report on Form 10-K, which
      are identified in Part III, Item 13.





Transitional
      Small Business Disclosure Format (Check one): Yes oNo x





(*)
      Affiliates for the purposes of this Annual Report refer to the officers,
      directors of the issuer and subsidiaries and/or persons or firms owning 5%
      or
      more of issuer's common stock, both of record and beneficially.










**TABLE
      OF CONTENTS**


PART
                  IItem
                  1. Description of Business
              
              4Item
                  2. Description of Property
              
              13Item
                  3. Legal Proceedings
              
              13Item
                  4. Submission of Matters to a Vote of Security Holders
              
              15PART
                  IIItem
                  5. Market for Common Equity and Related Stockholder
                  Matters
              
              16Item
                  6. Management's Discussion and Analysis or Plan of
                  Operation
              
              18Item
                  7. Financial Statements and Supplementary Data
              
              24Item
                  8. Changes In and Disagreements With Accountants on Accounting
                  and
                  Financial Disclosure
              
              83Item
                  8a. Controls and Procedures
              
              83Item
                  8b. Other Information
              
              84PART
                  IIIItem
                  9. Directors and Executive Officers, Promoters and Control Persons
              
              85Item
                  10. Executive Compensation
              
              88Item
                  11. Security Ownership of Certain Beneficial Owners and Management
                  and
                  Related Stockholder Matters
              
              92Item
                  12. Certain Relationships and Related Transactions
              
              92Item
                  13. Principal Accountant Fees and Services
              
              92Item
                  14. Exhibits and Financial Statement Schedules
              
              92





2




**PART
      I**





**Forward-Looking
      Statements and Risk Factors**





Certain
      information included in this Form 10-K and other materials filed or to be filed
      by GlobeTel Communications Corp. ("GlobeTel," the “Company”, "we", "us" or
      "ours") with the Securities and Exchange Commission (as well as information
      included in oral or written statements made from time to time by us, may contain
      forward-looking statements about our current and expected performance trends,
      business plans, goals and objectives, expectations, intentions, assumptions
      and
      statements concerning other matters that are not historical facts. These
      statements may be contained in our filings with the Securities and Exchange
      Commission, in our press releases, in other written communications, and in
      oral
      statements made by or with the approval of one of our authorized officers.
      Words
      or phrases such as "believe", "plan", "will likely result", "expect", "intend",
      "will continue", "is anticipated", "estimate", "project", "may", "could",
      "would", "should" and similar expressions are intended to identify
      forward-looking statements. These statements, and any other statements that
      are
      not historical facts, are forward-looking statements within the meaning of
      the
      Private Securities Litigation Reform Act of 1995, 15 U.S.C.A. Sections 77Z-2
      and
      78U-5 (SUPP. 1996), as codified in Section 27A of the Securities Act of 1933
      and
      Section 21E of the Securities Exchange Act of 1934, as amended from time to
      time
      (the "Act").





Those
      statements include statements regarding our intent, belief or current
      expectations, and those of our officers and directors and the officers and
      directors of our subsidiaries as well as the assumptions on which such
      statements are based. Prospective investors are cautioned that any such
      forward-looking statements are not guarantees of future performance and involve
      risks and uncertainties, and that actual results and the timing of certain
      events may differ materially from those contemplated by such forward-looking
      statements.





In
      connection with the "safe harbor" provisions of the Act, we are filing the
      following summary to identify important factors, risks and uncertainties that
      could cause our actual results to differ materially from those projected in
      forward-looking statements made by us, or on our behalf. These cautionary
      statements are to be used as a reference in connection with any forward-looking
      statements. The factors, risks and uncertainties identified in these cautionary
      statements are in addition to those contained in any other cautionary
      statements, written or oral, which may be made or otherwise addressed in
      connection with a forward-looking statement or contained in any of our
      subsequent filings with the Securities and Exchange Commission. Because of
      these
      factors, risks and uncertainties, we caution against placing undue reliance
      on
      forward-looking statements. Although we believe that the assumptions underlying
      forward-looking statements are reasonable, any of the assumptions could be
      incorrect, and there can be no assurance that forward-looking statements will
      prove to be accurate. Forward-looking statements speak only as of the date
      on
      which they are made. We do not undertake any obligation to modify or revise
      any
      forward-looking statement to take into account or otherwise reflect subsequent
      events, or circumstances arising after the date that the forward-looking
      statement was made.





The
      following risk factors may affect our operating results and the environment
      within which we conduct our business. If our projections and estimates regarding
      these factors differ materially from what actually occurs, our actual results
      could vary significantly from any results expressed or implied by
      forward-looking statements. These risk factors include, but are not limited
      to,
      changes in general economic, demographic, geopolitical or public safety
      conditions which affect consumer behavior and spending, including the armed
      conflict in Iraq or other potential countries; increasing competition in the
      VoIP segment of the telecommunications industry; adverse Internet conditions
      which impact customer traffic on our Company's networks in general and which
      cause the temporary underutilization of available bandwidth; various factors
      which increase the cost to develop and/or affect the number and timing of the
      openings of new networks, including factors under the influence and control
      of
      government agencies and others; fluctuations in the availability and/or cost
      of
      local minutes or other resources necessary to successfully operate our Company's
      networks; our Company's ability to raise prices sufficiently to offset cost
      increases, including increased costs for local minutes; the feasibility and
      commercial viability of our Stratellite project; related contemplated funding
      from third parties to finance the project, and necessary cooperation with
      various military and non-military agencies of the United States government,
      and
      similar agencies of foreign government and telecommunication companies; depth
      of
      management and technical expertise and source of intellectual and technological
      resources; adverse publicity about us and our networks; our current dependence
      on affiliates in our overseas markets; relations between our Company and its
      employees; legal claims and litigation against the Company; including the
      recently commenced SEC investigation; the availability, amount, type, and cost
      of capital for the Company and the deployment of such capital, including the
      amounts of planned capital expenditures; changes in, or any failure to comply
      with, governmental regulations; the amount of, and any changes to, tax rates
      and
      the success of various initiatives to minimize taxes; and other risks and
      uncertainties referenced in this Annual Report on Form 10-K. This statement,
      and
      any other statements that are not historical facts, are forward-looking
      statements within the meaning of the Private Securities Litigation Reform Act
      of
      1995, as codified in Section 27A of the Securities Act of 1933 and Section
      21E
      and the Securities Exchange Act of 1934, as amended from time to time (the
      "Act").





This
      annual report also contains certain estimates and plans related to the
      telecommunications industry in which we operate. The estimates and plans assume
      that certain events, trends and activities will occur, of which there can be
      no
      assurance. In particular, we do not know what level of growth will exist, if
      any, in the telecommunications industry, and particularly in those domestic
      and
      international markets in which we operate. Our growth will be dependent upon
      our
      ability to compete with larger telecommunications companies, and such factors
      as
      our ability to collect on our receivables and to generate profitable revenues
      from operations and/or from the sale of debt or equity securities, of which
      there can be no assurance. If our assumptions are wrong about any events, trends
      and activities, then our estimates for the future growth of GlobeTel and our
      consolidated business operations may also be wrong. There can be no assurance
      that any of our estimates as to our business growth will be
      achieved.




3




**ITEM
      1. DESCRIPTION OF BUSINESS**





**General**





GlobeTel
      Communications Corp. (“GlobeTel”), a Delaware corporation was established in
      July 2002, is engaged in the business of providing telecommunication services,
      primarily involving Internet telephony using Voice over Internet Protocol
      ("VoIP") equipment.





**Reverse
      Stock Split**





GlobeTel
      is authorized to issue up to 250,000,000 shares of Common Stock, par value
      $0.00001 per share, (subsequent to a 15-for-1 reverse stock split on May 23,
      2005 and subsequent to an increase in the authorized shares from 150,000,000
      to
      250,000,000 at the shareholder meeting on June 21, 2006) and 10,000,000 shares
      of Preferred Stock, par value $0.001. The post split share calculation will
      be
      used throughout this document, unless noted. The preferred stock is a so-called
      "blank check" preferred, meaning that its terms such as dividends, liquidation
      and other preferences, are to be fixed by our Board of Directors at the time
      of
      issuance. The dividends, liquidation rights and other preferences for each
      class
      of Preferred Stock are explained in Item 7, Financial Statements, Note
      27.





**Recent
      Developments**





On
      October 5, 2007, GlobeTel received a " Wells Notice"
      from the Securities and Exchange Commission (the "SEC") in connection with
      the
      SEC’s ongoing investigation of the Company. The Wells Notice provides
      notification that the staff of the SEC intends to recommend to the Commission
      that it bring a civil action against the Company for possible violations of
      the
      securities laws including violations of Sections 5 and 17(a) of the Securities
      Act of 1933; Sections 10(b), 13(a), and 13(b)(2)(A) & (B) of the Securities
      Exchange Act of 1934 (“Exchange Act”) and Rules 10b-5, 12b-20, 13a-1, 13a-11,
      and 13a-13 thereunder; and seeking as relief a permanent injunction, civil
      penalties, and disgorgement with prejudgment interest.  The staff is also
      considering recommending that the SEC authorize and institute proceedings to
      revoke the registration of Company’s securities pursuant to Section 12(j) of the
      Exchange Act.





Under
      the
      process established by the SEC, recipients have the opportunity to respond
      in
      writing to a Wells Notice
      before the SEC staff makes any formal recommendation to the Commission regarding
      what action, if any, should be brought by the SEC.





On
      November 26, 2007 the SEC announced that it had filed a civil lawsuit against
      two former employees of GlobeTel alleging that Joseph J. Monterosso, former
      Chief Operating Officer of GlobeTel and former president of the Company’s
      Centerline Communications Subsidiary, and Luis Vargas, an employee of
      Centerline, engaged in a scheme to create $119 million in revenue that was
      subsequently reported on the Company’s financial statements as filed with the
      Commission. *Securities
      and Exchange Commission v. Joseph J. Monterosso and Luis E.
      Vargas* ,
      Civil
      Action No. 07-61693 (S.D. Fla., filed on November 21, 2007).




**Restatement
      of Results**




We
      have
      determined that, in certain cases, we misinterpreted or misapplied Generally
      Accepted Accounting Principles (“GAAP”) in our 2004 and 2005 consolidated
      financial statements and, accordingly, we have restated our consolidated
      financial statements for the periods ended December 31, 2004 and
      2005.




As
      discussed more fully below, the restatements involve, among other matters,
      revenue recognition issues related to reporting gross revenue versus net as
      per
      EITF Issue 99-19. In making these restatements, we have performed an internal
      analysis of our accounting policies, practices, procedures and disclosures
      for
      the affected periods.




4


*Summary
        of restatement items*




The
      following tables set forth the effects of the restatement adjustments discussed
      below on revenue; cost of sales; net loss; and loss per share as presented
      in
      our consolidated statements of operations for the years ended December 31,
      2004 and 2005, and intangible assets. The restatement adjustments are discussed
      in the paragraphs following the tables.


**Year
                    ended December 31, 2005****Revenue**
                
                **Cost
                    of Sales**
                
                **Net
                    Loss**
                
                **Loss
                    per**
                  **Share**
                
                **Intangible**
                  **Assets**Previously
                    reported
                
                $
                81,143,838
                
                $
                80,730,141
                
                $
                (31,953,395
                )
                $
                (0.43
                )
                $
                9,907,550**Restatement
                    Adjustments, net:**Net
                    Revenue Adjustment
                
                $
                (70,999,058
                )
                $
                (70,999,058
                )
                
                —
                
                
                (0.00
                )2004
                    Purchase accounting
                
                
                —
                
                
                —
                
                
                —
                
                
                (0.00
                )
                
                (2,778,000
                )Purchase
                    accounting
                
                
                —
                
                
                —
                
                
                (7,129,550
                )
                
                (0.00
                )
                
                (7,129,550
                )Net
                    restatements
                
                $
                (70,999,058
                )
                $
                (70,999,058
                )
                
                (7,129,550
                )
                
                (0.09
                )
                
                (9,907,550
                )As
                    restated
                
                $
                10,144,780
                
                $
                9,731,083
                
                $
                (39,082,945
                )
                $
                (0.52
                )
                $
                —




**Year
                ended December 31, 2004****Revenue**
            
            **Cost
                of Sales**
            
            **Net
                Loss**
            
            **Loss
                per**
              **Share**
            
            **Intangible**
              **Assets**Previously
                reported
            
            $
            28,996,213
            
            $
            29,187,414
            
            $
            (13,166,869
            )
            $
            (0.02
            )
            $
            2,778,000**Restatement
                Adjustments, net:**Net
                Revenue Adjustment
            
            $
            (17,686,837
            )
            $
            (17,686,837
            )
            
            —
            
            
            (0.00
            )Purchase
                accounting
            
            
            —
            
            
            —
            
            
            (2,778,000
            )
            
            (0.00
            )
            
            (2,778,000
            )Net
                restatements
            
            $
            (17,686,837
            )
            $
            (17,686,837
            )
            
            (2,778,000
            )
            
            (0.00
            )
            
            (2,778,000
            )As
                restated
            
            $
            11,309,376
            
            $
            11,500,577
            
            $
            (15,944,869
            )
            $
            (0.02
            )
            $
            —




5




**Net
      Revenue Adjustment**





In
      2005,
      we engaged in transactions where we recorded our wholesale telecommunications
      revenues as Gross Revenue. After thorough review, we concluded that 2005
      revenues equaling $70,999,058 could not be supported and thus were reduced
      from
      previously reported revenues. The adjustments were offset against previously
      reported cost of sales by the same amount of $70,999,058.





In
      2004,
      we engaged in transactions where we recorded our wholesale telecommunications
      revenues as Gross Revenue. After thorough review, we concluded that 2004
      revenues equaling $11,190,902 could not be supported and thus were reduced
      from
      previously reported revenues, Also after applying the indicators, upon
      application of the EITF Issue 99-19 “Reporting Revenue Gross as a Principal
      versus Net as an Agent,” Accounting Principles Board Opinion No. 10 (“APB 10”)
“ Revenue
      Recognition Principle ,“
and
      Financial Accounting Standards Board Interpretation No. 39 (“FIN 39”)
“ Offsetting
      of Amounts Related to Certain Contracts ,” we
      concluded that we should record only the net revenue from certain wholesale
      telecommunications due to the indicators not supporting the criteria for gross
      revenue which further reduced revenues $6,495,935 for a total of $17,686,837.
      The adjustments were offset against previously reported cost of sales by the
      same amount of $17,686,837.




In
      our
      previously issued consolidated financial statements, we booked the gross
      consideration for all our wholesale telecommunications revenue without
      additional consideration to its characteristics. As part of our internal
      analysis of our accounting policies, practices and procedures in place in 2004
      and 2005, we did not review the previous accounting model for recording our
      revenues.




**Purchase
      Accounting**




As
      described in Item 7, Financial Statements, Note 9 - **** Asset
      Acquisition - Hotzone, we found a discrepancy in the application of purchase
      accounting for the June 2, 2005 transaction and have recorded an adjustment
      to
      correct it in our restated consolidated financial statements.




*Intangible
      Assets.* We
      recorded restatement adjustments to the amounts allocated to the
      technology-in-place intangible assets acquired in the transaction. The effect
      of
      the adjustments to intangible assets in 2005 was a reduction of $7,129,550
      and
      subsequently an increase to research and development expense in 2005 of
      $7,129,550.




As
      described in Item 7, Financial Statements, Note 8 - **** Asset
      Acquisition - Sanswire, we found a discrepancy in the application of purchase
      accounting for the April 15, 2004 transaction and have recorded an adjustment
      to
      correct it in our restated consolidated financial statements.




*Intangible
      Assets.* We
      recorded restatement adjustments to the amounts allocated to the
      technology-in-place intangible assets acquired in the transaction. The effect
      of
      the adjustments to intangible assets in 2004 was a reduction of $2,778,000
      and
      subsequently an increase to research and development expense in 2004 of
      $2,778,000.




**Background**





We
      were
      previously a wholly-owned subsidiary of American Diversified Group, Inc.
      (“ADGI”). At a special meeting of stockholders of ADGI held on July 24, 2002,
      the stockholders of ADGI approved a plan (the "Plan") for the exchange of all
      outstanding shares of ADGI for an equal number of shares of
      GlobeTel.





ADGI
      was
      incorporated under the laws of the State of Nevada as Terra West Homes, Inc.
      on
      January 16, 1979. On March 15, 1995, its name was changed to "American
      Diversified Group, Inc." During the period ended July 24, 2002, ADGI's business
      activities included (i) sale of telecommunication services primarily involving
      Internet telephony using VoIP through its Global Transmedia Communications
      Corporation subsidiary ("Global"), and (ii) wide area network and local area
      network services provided through its NCI Telecom, Inc. subsidiary ("NCI").





Global
      was acquired by ADGI on February 19, 2000, and NCI was acquired on June 29,
      2000. During 2002, Global and NCI were merged with and into ADGI, with ADGI
      as
      the surviving corporation.





When
      ADGI
      exchanged all of its outstanding shares of common stock for GlobeTel common
      stock, ADGI became a wholly-owned subsidiary of GlobeTel and GlobeTel began
      conducting the business formerly conducted by ADGI.





We
      have a
      99% ownership of GTCC de Mexico, S.A. de C.V., a Mexican company established
      to
      represent our interests in Mexico. The remaining 1% is owned by the Company's
      Mexican lawyer who is representing the Company in all matters of the operations
      in Mexico. GTCC de Mexico is utilized in connection with our operations in
      Mexico including No Mas Cables de Mexico S.A. de CV.




6





In
      2004,
      we formed wholly-owned subsidiaries: Sanswire, LLC (“Sanswire-FL”) for our
      Stratellite project; and Centerline Communications, LLC, (“Centerline” or “CLC”)
      and its wholly-owned subsidiaries, EQ8, LLC, G Link Solutions, LLC, Volta
      Communications, LLC, and Lonestar Communications, LLC for the purpose of the
      recording and managing the sale of wholesale minutes and related network
      management functions. We have since closed Centerline and its
      subsidiaries.





In
      2004,
      we acquired a 73.15% interest in Consolidated Global Investments, Ltd. (“CGI”),
      formerly known as Advantage Telecommunications, Ltd. (“ATC”), an Australian
      company. CGI was to be utilized in the carrier sales sector of our business
      and
      was later to be a licensee of the Sanswire Networks, LLC in Australia. However,
      we have since sold our shares in CGI back to the company and no longer have
      any
      interest in CGI. Certain shares of GlobeTel acquired by CGI were sold by CGI.
      The Securities and Exchange Commission has questioned the validity of the
      exemption used for the sale of such shares as more fully discussed below in
      Item
      3 “Legal Proceedings.”





**Business
      of GlobeTel**





We
      are a
      communications company with a range of services, product lines, and projects
      as
      described below. Our core products and services are: wireless broadband
      networks, IP Telephony (“VoIP” or “Voice over Internet Protocol”), and lighter
      than air (“LTA”) unmanned aerial vehicles (“UAVs”) for use in communications and
      other applications.





From
      time
      to time, we embark on certain services, product lines and projects and enter
      into certain contractual and non-contractual relationships, which we may
      subsequently deem unfeasible, impractical, cost prohibitive or otherwise
      incompatible with our overall business plans. In such cases, we disclose the
      initial intent and anticipated result of the applicable service, product,
      project or relationship. We further disclose the current status of each project
      and current and/or contemplated changes resulting from the factors mentioned
      above.





**International
      Wholesale Carrier Traffic**





The
      business of International Wholesale Carrier traffic is a business whereby we
      bought and sold large blocks of calling minutes with particular origination
      and
      termination points. In some instances, we would enter into agreements with
      established international telephone carriers to deliver international calls
      into
      their domestic telephone networks for termination to the parties being called.
      Additionally we purchased a bulk package of minutes to specific destinations
      and
      resold these minutes in smaller quantities to individual and business customers.
      In most instances, our customers prepaid for these minutes or post letters
      of
      credit with our bank, securing their purchases.





Beginning
      in July 2004, we began to migrate these operations from GlobeTel, the parent
      company, to our subsidiary, Centerline and its subsidiaries. The migration
      was
      completed in the beginning of September 2004.





In
      2007,
      the Centerline business was wound down and the Company has liquidated most
      of
      the Centerline assets. Additionally, certain revenues reported by Centerline
      are
      being restated and are the subject of an investigation by the Securities and
      Exchange Commission. The Commission believes that certain former officers and
      employees of the Company improperly recognized revenue from carrier traffic
      that
      ran off 3 rd party
      telecommunications switches, and created false invoices with regard to such
      revenue.





**Networks**





To
      provide the above described services we interconnect with licensed carriers
      in
      each country we would desire to provide calling services. In some countries,
      we
      placed electronic equipment called a "hub" on the carrier's premises and then
      interconnect with their local network. In other countries, we would connect
      directly to the carrier's hub, which is connected to the local telephone network
      in that country. Historically, we maintained hubs in Miami, Los Angeles,
      Monterrey Mexico, Sao Paulo, Brazil and Hong Kong.





When
      we
      would establish service to a new country and traffic volume is relatively low,
      we create a "virtual" network connection between the two hubs. Virtual networks
      have been described as "tunnels" through the Internet.





In
      line
      with the Company’s strategy to close down the Centerline business, all Virtual
      Networks were also shut down.





**Internet
      Telephony**





Since
      our
      launch of the MagicPhone in May of 2004, we expanded and upgraded our Internet
      Telephony product line. Our original MagicPhone product and program, which
      was
      based on the SIP protocol was being sold primarily in the Mexican market. Along
      with the MagicPhone launch, we continued product development and upgraded the
      system based on new open source standards that better serve the needs of both
      residential and business consumers. It also opened up many markets that the
      older technology could not reach. Our new MagicPhone was "plug and play" and
      provides the user with enhanced features such as conference calling, call
      forwarding, emergency services, voice mail and multiple lines.




7





We
      targeted the Mexican, Latin American and Eastern European markets for the
      continued rollout of this product.





The
      MagicPhone line was replaced by the StrateVoIP system in 2006 which uses the
      SIP
      protocol and industry standard Linksys PAPs. StrateVoIP launched services aimed
      at the Brazilian market with its VozBrasil and iLigue products. The StrateVoIP
      system also underlies the Company’s wireless broadband offerings. The Company is
      no longer actively promoting or supporting the VozBrasil and iLigue services,
      though the underlying StrateVoIP platform remains in use.





**Enhanced
      Services - PrePaid Calling Services**





Our
      Enhanced Services use proprietary software that operated on our switch
      interconnected with various customer networks. PrePaid Calling Services are
      the
      most widely used Enhanced Service. Our Prepaid Calling Services allowed carrier
      customers and reseller customers to sell their own branded prepaid calling
      cards
      in their markets and allows their customers to make both domestic and
      international calls.





We
      focused on prepaid calling services and outsourcing the use of our Enhanced
      Services switch. We were a provider and enabler of these services having
      expanded our market from telephone companies and prepaid calling card resellers
      to financial institutions who wish to create new revenue sources from their
      existing bank card customer base by introducing new value added services to
      their bank cards.





These
      enhanced services were part of the Stored Value Services, further discussed
      below, which in November 2006 were sold to Gotham Financial Services. GlobeTel
      entered into an agreement to sell substantially all of the assets related to
      its
      stored value card division, also known as the Magic Money program, to Gotham
      Financial LLC. Under terms of the agreement, Gotham acquired substantially
      all
      of the assets, which include the stored value program, financial processing
      switch and contracts, and assumed the liabilities associated with the program
      including certain employees and leased office space.





The
      agreement calls for the payment, over a 3-to-6 year period, of up to $4 million.
      The length of the payment period depends upon Gotham making certain minimum
      payments. Revenues earned by GlobeTel will be based on the successful rollout
      of
      the platform by Gotham and on user fees following a formula that considers
      the
      total number of transactions on a Stored Value card and use of the card at
      any
      ATM, Point-of-Sale (POS) or other transaction, under closed and committed
      contracts GlobeTel had at the time of sale, and the number of transactions
      utilizing the Financial Processing Switch.





The
      agreement also gives GlobeTel the right to the most favorable pricing if it
      decides in the future to utilize the services to be provided by
      Gotham.





**Stored
      Value Services**





In
      late
      2003, we began offering new products and services which we call the MagicMoney
      program. The features of the MagicMoney program allowed telecommunications
      companies and financial institutions worldwide to add true stored value services
      to their existing products and create new products. MagicMoney stored value
      services included: prepaid long distance and international calling services,
      debit card "electronic bank accounts" and funds sharing services.





We
      developed the MagicMoney program as a stored value product to sell into specific
      ethnic communities around the world so that Overseas Foreign Workers remain
      connected with their family members and friends in their country of origin.
      Some
      of the features that made our product unique were the combination of such stored
      value services as inexpensive prepaid calling services, funds sharing between
      linked cardholders, electronic banking services and a full complement of debit
      card services that were offered anywhere the Maestro and Cirrus logos are found,
      which covers between 5 - 8 million merchants and approximately 1 million ATMs
      around the world.





Our
      programs were geared towards Latin American, Filipino and Asian markets, linking
      their overseas family members to home. One of our key goals was to tap into
      the
      multi-billion dollar money remittance market while providing all of the other
      financial and non-financial services not commonly available to these ethnic
      groups.





By
      having
      developed a comprehensive stored value services platform and system
      infrastructure we were able to support a unique range of innovative solutions
      for telecommunications companies, financial institutions, credit card
      processors, retail outlets, nonprofit organizations and additional businesses
      in
      a range of vertical markets that already have their own existing card
      programs.





We
      were
      widely recognized as "an enabler" of ground-breaking stored value applications
      and technology. Our suite of stored value applications aided firms with existing
      card programs and brought them flexibility to add ancillary services to their
      cards. These ancillary services helped firms create new profit centers from
      products, drive new value added benefits for existing cardholders and create
      new
      marketing vehicles for firms to attract new cardholders and grow their
      businesses. These new stored value technology based solutions further defined
      our paradigm shift.




8





We
      have
      developed a wireless access application to enable the cardholders in the United
      States to access all of the stored value features and functionally via their
      mobile phones using SMS technology.





The
      following Stored Value Service Agreements & Programs were transferred to
      Gotham Financial Services as part of their purchase of the MagicMoney program
      in
      November 2006.





**Banco
      Azteca Letter of Intent**





In
      February 2005, we signed a Letter of Intent (“LOI”) with Banco Azteca, a Mexican
      financial institution. We are no longer pursuing this opportunity.





**Bankcard
      Agreement**





In
      June
      2004, we entered into an agreement with Bankcard Inc. (“Bankcard”), a member of
      the RCBC Group, one of the largest private commercial bank and financial
      institutions in the Philippines, to introduce a stored value card program for
      domestic and international use. Bankcard will be able to issue a MasterCard
      and/or VISA card that will offer Overseas Filipino Workers and Filipinos in
      foreign countries, convenient, risk free and low cost international funds
      transfer and discounted long distance calling services.





We
      and
      Bankcard were working on the deployment of a MasterCard Electronic Signature
      based Stored Value Card to be launched in the Philippines, the Middle East
      and
      additional countries in South East Asia. We have not been able to develop this
      opportunity and, as a result, we are no longer pursuing it.





**Globe
      Telecom Memorandum of Agreement**





In
      October 2004, we signed a Memorandum of Agreement with Globe Telecom (“Globe”),
      a Filipino mobile company to jointly develop an integrated payment system that
      will combine the Company's stored value card payment processing capabilities
      with Globe's SMS applications technology. The purpose of this program was to
      allow the Company's stored value cardholders to send money directly to family
      and friends through their Globe Mobile Phone (“G-Cash”). We are no longer
      pursuing this opportunity.





**Equitable
      Card Letter of Understanding**





In
      August
      2004, we signed a Letter of Understanding with Equitable Card Network, Inc.
      for
      Equitable to enable the Company to issue GlobeTel branded VISA Electron Cards
      in
      the Philippines. We are no longer pursuing this opportunity.





**Pier
      One Filipino Seafarers Union**





In
      July
      2004, we entered into an agreement with Pier One to develop GTEL's Stored Value
      Card Program for seafarers. The "Lighthouse Card" allowed Filipino seafarers
      to
      load and remit cash from overseas at special rates. Corresponding Lighthouse
      cardholders in the Philippines could then withdraw money from any ATM in the
      Philippines and access their account from most locations throughout the world.
      We are no longer pursuing this opportunity.





**First
      Class Professional Agreement**





In
      August
      2004, we entered into an agreement with First Class Professional Human
      Resources, Inc. (“FC Professional”), a Philippines corporation based in Manila,
      to develop the GTEL Stored Value Program for use by its members in Japan. FC
      Professional represented approximately 40,000 Filipino workers in Japan. These
      benefits included low cost international calling, funds sharing and loyalty
      discounts.





We
      are no
      longer pursuing this opportunity due to the mandate passed by the Japanese
      government that dramatically reduced the number of Filipino workers who were
      allowed to work in Japan.





**OnQ
      Program**





In
      July
      2004, we announced the launching of the stored value card program in Australia,
      Bill Express, through the Australian distributor, OnQ, with over 8,000 points
      of
      sale throughout Australia. We are no longer pursuing this
      opportunity.





**Timesofmoney.com
      Memorandum of Understanding**





In
      September 2004, we entered into a Memorandum of Understanding with Times of
      Money in which Timesofmoney.com would provide direct deposit facilities to
      54
      banks and issue prepaid cards in India for GTEL cardholders. We are no longer
      pursuing this opportunity.




9





**Englewood
      Agreement**





In
      May of
      2004, we signed a joint venture agreement with Englewood Corporation whereby
      (“Englewood”) would provide all of its current and future business opportunities
      to GlobeTel. This included carrier customers, carrier termination networks,
      stored value products and services and value added ATM, debit and credit card
      products for both financial and non financial products and services and the
      processing capabilities for such transactions on ATM/debit card networks
      including but not limited to MasterCard Inc, MasterCard International, VISA
      and
      private banking ATM networks. This was transferred to Gotham as part of the
      sale
      of the Magic Money division





**Processing
      Switch Agreement**





In
      August
      2004, through Englewood Corporation, we entered into an agreement to join with
      Grupo Ingedigit C.A. ("GI"), a certified MasterCard third party transaction
      processor and the leading electronic financial transactions services backbone
      provider for the banking industry in Venezuela, establishing a new venture
      in
      Miami, Florida providing domestic and worldwide financial transaction processing
      services. This domestic venture combined with GI's current international
      processing capabilities will support on its own network all the Magic Money
      and
      other private label GTEL stored value card programs around the world, as well
      as
      other third party cards. Both parties were to contribute equally to the
      operation of the Miami switch. The switch was expected to be certified to
      process MasterCard, Visa, Cirrus, and other independent ATM network
      transactions. Operations were expected to begin by the third quarter of 2005.
      The switch was to be installed and integrated by Englewood Corporation; however
      the Switch was included in the sale of the MagicMoney program to Gotham
      Financial Services in November 2006.





**HotZone
      Wireless**





In
      September 2004, the Company entered into an independent contractor agreement
      with Hotzone Wireless, LLC (“HotZone”), a service provider for
      consulting/engineering services related to the Sanswire Stratellite project.
      The
      non-exclusive service provider provided engineering / consulting services,
      transmission equipment, and installation and testing of equipment. The term
      of
      the agreement was for six (6) months and was automatically renewable for
      additional one (1) year terms after the initial term unless terminated by either
      party. As initial compensation, Company paid the service provider $10,000 per
      month. This agreement was terminated during fiscal year 2005.





On
      June
      2, 2005, the Company entered into an agreement to acquire assets of HotZone,
      an
      advanced developer of WIMAX and extended range WIFI Systems with operations
      in
      the United States and Europe. The acquisition transaction, which closed during
      the three months ended September 30, 2005, was paid with $27,000 cash and
      provides for a total of 2 million (post split) shares of the Company's common
      stock to be issued in increments of 666,667 shares on each of the first, second,
      and third anniversary dates of the agreement, assuming that certain milestones
      are achieved. The first milestone was achieved for 2005, and accordingly, shares
      are to be issued during fiscal year 2006. The remainder of the shares were
      transferred in 2007.





Mr.
      Altvater has subsequently left the Company and the Company entered into a
      consulting agreement with him to continue to provide technical support and
      manufacturing to the Company. That agreement was terminated in May 2007 and
      the
      Company has filed an action for the return of certain property held by Altvater
      pursuant to the consulting agreement. The Company and Altvater are currently
      in
      negotiations to revolve the outstanding matters between the
      parties.





The
      Company has installed a HotZone based wireless network in and around Pachuca,
      Mexico, northwest of Mexico City. At this time, the Company cannot determine
      whether or not this venture will be successful in its current form. The joint
      venture, No Mas Cables de Mexico, SA de CV provides coverage to approximately
      8,000 housing units, but penetration of the service has been lower than
      expected. With our partners we are exploring how to increase market penetration
      and which other markets would benefit from the services offered.





**Sanswire
      Networks LLC**





Sanswire
      is developing a Wireless Broadband Network utilizing high-altitude airships
      called Stratellites that will be used to provide wireless voice, video, and
      data
      services. These Stratellites will form strategic nodes for the Super Hub(TM)
      Network. A Stratellite is similar to a satellite, but is stationed in the
      stratosphere rather than in orbit. At an altitude of only 13 miles, each
      Stratellite will have clear line-of-site to an entire major metropolitan area
      and should allow subscribers to easily communicate in "both directions" using
      readily available wireless devices. Each Stratellite will be powered by a series
      of solar powered hybrid electric motors and other state-of-the-art energy
      storage technologies.




10





In
      addition to Sanswire's Wireless Broadband Network, proposed telecommunications
      uses include cellular, 3G/4G mobile, MMDS, paging, fixed wireless telephony,
      HDTV and others.





We
      strongly believe that we will be able to use the Stratellites as the most
      efficient and cost-effective means of interconnecting our Super
      Hubs(TM).





The
      Stratellite is being designed and tested to operate at an altitude of between
      55,000 and 65,000 feet using GPS coordinates to achieve its on-station position.
      Tests of the Stratellite and its systems began in the second quarter of
      2005.





We
      have
      had on-going discussions with several groups within the U.S. government and
      military concerning the rollout and use of the Stratellite. Further, we are
      in
      discussions with the other corporate and private groups, as well as foreign
      governments, all of whom have expressed interest in the development and
      commercial viability of the Stratellite.





Sanswire
      has been contacted by the U.S. Army's Space and Missile Defense Command
      (“SMDC”), which expressed its desire to be involved in the sharing of technology
      and information as well as possible involvement in the development of the
      Stratellite. In addition to the commercial applications being developed by
      GTEL,
      the SMDC sees several military intelligence gathering and operational
      applications for Stratellite-type systems.





On
      January 18, 2005, we signed a Letter of Intent (“NASA LOI”) with the National
      Aeronautics and Space Administration (“NASA”). The agreement with NASA's Dryden
      Flight Research Center at Edwards Air Force Base in California positions us
      for
      future governmental associations and business development ventures.





The
      NASA
      LOI was subsequently terminated.





On
      March
      8, 2005, we announced a global strategy for Sanswire. We signed a Letter of
      Intent to immediately establish Sanswire Europe S.A., its first regional
      operating subsidiary. Sanswire Europe was to be a joint venture between
      GlobeTel's wholly-owned operating subsidiary, Sanswire Networks, LLC and
      Strato-Wireless Ltd. (“SWL”), in which GlobeTel will own 55% and Strato-Wireless
      will own 45% of the shares of the European Venture.





In
      December 2006, Sanswire demonstrated the Sanswire 2A Technology Demonstrator
      that opened a new area of service for the Company: low and mid-altitude
      airships. In 2007, Sanswire designed and continues to develop low and mid
      altitude ships called SkySats. These SkySat airships have been designed to
      address the growing military and defense markets; providing integrated solutions
      for Homeland Security, Border Control and persistent surveillance. These
      airships will supplement the high-altitude airship, Stratellites that will
      be
      used to provide wireless voice, video, and data services.





**Competitive
      Business Conditions - Telecommunications Services**





The
      telecommunications industry is highly competitive, rapidly evolving and subject
      to constant technological change and to intense marketing by different providers
      of functionally similar services. Since there are few, if any, substantial
      barriers to entry, except in those markets that have not been subject to
      governmental deregulation, we expect that new competitors are likely to enter
      our markets. Most, if not all, of our competitors are significantly larger
      and
      have substantially greater market presence and longer operating history as
      well
      as greater financial, technical, operational, marketing, personnel and other
      resources than we do.





Due
      to
      these competitive conditions and the high cost of capital associated with
      running the business, the Company has decided to shut down its carrier
      operations.





**Competitive
      Business Conditions - Sanswire Project**





We
      are
      aware of other companies that are also developing high altitude platforms
      similar in nature to our Stratellite project. Our competitors, though, may
      have
      more resources available to develop their respective products. Furthermore,
      since the Sky Sat and Stratellite project are currently in the development
      stage, there can be no assurance that the project will successfully complete
      the
      development stage and result in a commercially viable product. Even if a
      properly functioning, commercially viable product is established there can
      be no
      assurance that revenues will be achieved from the sales of Stratellites or
      Sky
      Sats or that the costs to produce such revenues will not exceed the revenues
      or
      that the project will otherwise be profitable. There can be no assurance that
      we
      will be able to successfully achieve the results we anticipate with this
      project.





**Sources
      and Availability of Hardware and Software**





GlobeTel
      has developed in-house proprietary software for network applications and stored
      value products. We are dependent upon many suppliers of hardware and software.
      However we use equipment from prime manufacturers of equipment including Cisco,
      Motorola, SUN, HP and Newbridge Networks, among others. Equipment for the
      Stratellite, SkySat and the prototypes thereof are custom made for those
      products and are dependent upon either single or limited number of suppliers
      for
      certain goods. Failure of a supplier could cause significant delays in delivery
      of the airships if another supplier cannot be promptly found.




11





**Sources
      and Availability of Technical Knowledge and Component
      Parts**





The
      Sanswire project requires a high level of technological knowledge and adequately
      functioning component parts and sub-assemblies to continue the project and
      achieve commercial viability. We have current and contemplated arrangements
      for
      supply of both internal and external technical knowledge to provide the
      intellectual capital to continue with this project. Specifically, there is
      a
      high level of interest and anticipated cooperation from technical experts within
      the government, military, and commercial sectors. Similarly, we have current
      and
      contemplated arrangements for supply required component parts, both internally
      developed, as well as, outsourced from specialty contractors to provide
      component parts to continue with this project in the near term.





**Dependence
      on a Few Customers**





As
      discussed below in Item 6, Management Discussion and Analysis and Plan of
      Operation, we are currently dependent on a limited number of customers. As
      we
      expand our products, services, and markets, we expect to substantially broaden
      our customer base and reduce our dependence upon just a few customers. However,
      there is no guarantee that we will be able to broaden our customer
      base.





**Trademarks**





We
      have
      filed marks and/or are filing marks for the following:





·
            International
                trademark application under the Madrid Protocol for
                MagicMoney;


·
            International
                trademark application under the Madrid Protocol for
                GlobeTel;


·
            Trademark
                of GlobeTel in Canada;


·
            Trademark
                of MagicMoney in Canada;


·
            Trademark
                of GlobeTel in Mexico;


·
            Trademark
                of MagicMoney in Mexico;


·
            Trademark
                of GlobeTel in Guatemala;


·
            Trademark
                of MagicMoney in Guatemala;


·
            Trademark
                of MagicMoney in Brazil;


·
            Trademark
                of GlobeTel in Brazil; and


·
            Trademark
                of GlobeTel in Philippines.





We
      have
      filed for registration of the names "Stratellite" and "Sanswire" under the
      Madrid Protocol and in many non-Madrid Protocol countries.





We
      intend
      to file for patents covering unique design and intellectual property covering
      the design and engineering of the Stratellite, but will wait until these are
      finalized.





**Regulatory
      Matters**





Carriers
      seeking to provide international telecommunication services are required by
      Section 214 of the Telecommunications Act to obtain authorization from the
      Federal Communications Commission to provide those services. We applied for
      and
      obtained the required authorization.





Our
      operations in foreign countries must comply with applicable local laws in each
      country we serve. The communications carrier with which we associate in each
      country is licensed to handle international call traffic, and takes
      responsibility for all local law compliance. For that reason we do not believe
      that compliance with foreign laws will affect our operations or require us
      to
      incur any significant expense.





The
      export of the Stratellite or SkySat may be subject to United States State
      Department restrictions on the transfer of technology. We are currently
      investigating whether or not the export of the Sanswire products would require
      export licenses and how the production of these vehicles in Germany through
      our
      agreement with TAO Technologies, GmbH would impact this.





**Effect
      of Existing or Probable Governmental Regulations**





In
      February 1997, the United States and approximately seventy (70) other countries
      of the World Trade Organization (“WTO”) signed an agreement committing to open
      their telecommunications markets to competition and foreign ownership beginning
      in January 1998. These countries account for approximately 90% of world
      telecommunications traffic. The WTO agreement provides us and all companies
      in
      our industry with significant opportunities to compete in markets where access
      was previously either denied or extremely limited. However, the right to offer
      telecommunications services is subject to governmental regulations and therefore
      our ability to establish ourselves in prospective markets is subject to the
      actions of the telecommunications authorities in each country. In the event
      that
      new regulations are adopted that limit the ability of companies such as
      ourselves to offer VoIP telephony services and other services, we could be
      materially adversely affected.




12





**Research
      and Development**





Research
      and development costs for 2005 in connection with our Sanswire and Globetel
      Wireless projects were $9,494,223 and $3,038,085 for 2004 for our Sanswire
      project. Since our acquisition of the Sanswire assets in April 2004 and Globetel
      Wireless assets in June 2005, amounts of time and resources devoted to these
      businesses are expected to continue increasing in the near team as our
      Stratellite project continues and expands.





**Number
      of Total Employees and Number of Full-Time Employees**





At
      present we have 7 full-time employees, including our executive officers and
      employees of our subsidiaries. We do not believe that we will have difficulty
      in
      hiring and retaining qualified individuals in the fields of Internet telephony
      and other communications projects although the market for skilled technical
      personnel is highly competitive.





**ITEM
      2. DESCRIPTION OF PROPERTY**





We
      previously leased facilities at 9050 Pines Blvd., Suite 110, Pembroke Pines,
      Florida 33024, as of April 1, 2004 with an initial monthly rent of $5,462 (plus
      6% sales tax), and increases of 4% per year.





In
      November 2004, we leased additional adjacent space under the same terms and
      period as the existing lease, bringing the total monthly office rent to $9,186
      (including sales tax).





We
      have
      subsequently turned over the space we were occupying to Gotham Financial and
      have relocated the Company’s corporate offices to 101 NE 3 rd Ave.,
      Suite 1500, Fort Lauderdale, Florida 33301. Rent and services for this space
      is
      approximately $6,500 per month.





In
      January 2005, we satisfied our lease obligation at 444 Brickell Avenue, Suite
      522, Miami, Florida 33131 and have no further obligation in the
      property.





In
      January 2005, we signed a lease agreement with the San Bernardino International
      Airport Authority for hangar space at the airport in San Bernardino, CA for
      the
      purpose of assembling and storing the Stratellite prototype. The term of the
      agreement is from January 15, 2005 through March 31, 2005, at a monthly lease
      rate of $9,767. Three months prepaid rent totaling $29,302 was paid in December
      2004.





As
      of
      October 2007, Sanswire no longer occupies a hangar at Palmdale Regional Airport,
      the monthly cost of this space was $20,847. This facility was adjacent to the
      United States Air Force’s Plant 42 and Edwards Air Force Base. Sanswire
      constructed and tested Stratellite and Sky Sat prototypes at the facility.
      The
      hangar also included administrative office space.





Sanswire
      Technologies, Inc., the company from which we purchased our Sanswire, LLC
      assets, had an office space lease in Dekalb County, GA. The lease term was
      from
      April 1, 2004 through March 31, 2005, with monthly rent of $2,628. Although
      not
      directly obligated on this lease, the company paid the monthly rent from May
      2004 through March 2005, whereas employees of our subsidiary, Sanswire, LLC,
      utilized the premises. The employees have since vacated the premises and the
      company no longer occupies the space and is no longer obligated for any lease
      payments.





**ITEM
      3. LEGAL PROCEEDINGS**





Securities
      and Exchange Commission





In
      March
      2006 the Company received a request from the Securities and Exchange Commission
      (the “SEC”) regarding the purchase of Company shares by an administrative
      assistant around the time of a material corporate announcement. They asked
      for
      information regarding the announcement and the assistant’s knowledge of the
      announcement. The SEC later informed the Company that it did not intend to
      proceed with its investigation into the assistant.




13





The
      Company received a formal order of investigation from the SEC on September
      28,
      2006. While it only named the company and was not specific to any particular
      allegations, the SEC has requested documentation from certain officers and
      directors of the Company. In subsequent subpoenas the SEC has asked for
      information regarding the way the Company accounted for assets acquired with
      regard to its purchase of assets from HotZone Wireless LLC and Sanswire
      Technologies Inc.; information regarding the recognition of revenue regarding
      the Company’s Centerline subsidiary; and information regarding the sales of
      Company shares by an unconsolidated subsidiary.





On
      October 5, 2007, GlobeTel received a "Wells Notice" from the SEC in connection
      with the SEC’s ongoing investigation of the Company. The Wells Notice provides
      notification that the staff of the SEC intends to recommend to the Commission
      that it bring a civil action against the Company for possible violations of
      the
      securities laws including violations of Sections 5 and 17(a) of the Securities
      Act of 1933; Sections 10(b), 13(a), and 13(b)(2)(A) & (B) of the Securities
      Exchange Act of 1934 (“Exchange Act”) and Rules 10b-5, 12b-20, 13a-1, 13a-11,
      and 13a-13 thereunder; and seeking as relief a permanent injunction, civil
      penalties, and disgorgement with prejudgment interest. The staff is also
      considering recommending that the SEC authorize and institute proceedings to
      revoke the registration of Company’s securities pursuant to Section 12(j) of the
      Exchange Act.





Under
      the
      process established by the SEC, recipients have the opportunity to respond
      in
      writing to a Wells Notice before the SEC staff makes any formal recommendation
      to the Commission regarding what action, if any, should be brought by the SEC.





On
      November 26, 2007 the SEC announced that it had filed a civil lawsuit against
      two former employees of GlobeTel alleging that Joseph J. Monterosso, former
      president of the Company’s Centerline Communications Subsidiary, and Luis
      Vargas, an employee of Centerline, engaged in a scheme to create $119 million
      in
      revenue that was subsequently reported on the Company’s financial statements as
      filed with the Commission. *Securities
      and Exchange Commission v. Joseph J. Monterosso and Luis E.
      Vargas* ,
      Civil
      Action No. 07-61693 (S.D. Fla., filed on November 21, 2007).





Richard
      Stevens v. GlobeTel





The
      Company and its directors were sued in the case RICHARD STEVENS vs. GLOBETEL
      COMMUNICATIONS CORP., et al. Case No.: 06-cv 21071. The original allegations
      of
      the complaint were that the company’s proposed transaction to build wireless
      networks in Russia was a sham. The amended complaint alleged that the
      transaction was not a sham,
      but that the company refused to accept payment of $300 million. Recently, the
      officers and directors with the exception of Timothy Huff have been dismissed
      from the case.





The
      Company and the Plaintiff have reached a settlement in principle that has been
      filed with the Court for approval. Under the terms of the proposed settlement
      agreement in the class action, the Company’s D&O insurance carrier will make
      a cash payment to the class of $2,300,000, less up to $100,000 for potential
      counsel fees and expenses. All claims in the class action will be dismissed
      with
      prejudice. The US District Court for the Southern District of Florida has
      preliminarily approved the settlements reached in its pending securities class
      action and a shareholder derivative action





Alexsam
      v. GlobeTel





In
      August, 2004, GlobeTel was sued in the United States District Court for the
      Eastern District of Texas, Marshall Division, in a civil action entitled Alexsam,
      Inc. v. FSV Payment Systems, Ltd. et al. ,
      Civil
      Action No. 2-03CV-337 (“the Texas Lawsuit”). In this action, Alexsam alleged
      that GlobeTel infringed U.S. Patent No. 6,000,608, issued on December 14, 1999,
      entitled “Multifunction Card System”, and U.S. Patent No. 6,189,787, issued on
      February 20, 2001, entitled “Multifunctional Card System” (collectively referred
      to as “the Patents”). On October 8, 2004, GlobeTel filed a motion in the Texas
      Lawsuit to dismiss the entitled action. GlobeTel’s motion to dismiss was granted
      on January 14, 2005.





GlobeTel
      then took two actions against Alexsam. GlobeTel filed a motion in the Texas
      Lawsuit seeking to recover the attorneys’ fees and costs it incurred defending
      itself. GlobeTel also filed a Declaratory Judgment lawsuit against Alexsam,
      Inc.
      and Robert Dorf in the United States District Court for the Southern District
      of
      Florida, Ft. Lauderdale Division, in a civil action entitled GlobeTel
      Communications Corp. v. Alexsam, Inc. et al. ,
      Civil
      Action No. 05-60201-CIV (“the Florida Lawsuit”). This lawsuit sought, among
      other things, a declaration that GlobeTel’s product and service offerings would
      not infringe the Patents.





Alexsam
      and GlobeTel subsequently settled their dispute. In exchange for granting a
      non-exclusive license to GlobeTel for the Patents, GlobeTel withdrew its motion
      for attorneys’ fees in the Texas Lawsuit and dismissed the Florida Lawsuit. The
      License Agreement was made and entered into in September 2005. The license
      taken
      by GlobeTel extends further to GlobeTel’s customers, bank partners, third party
      financial processors and cardholders, and all those in privity with any of
      them,
      but only to the extent those entities’ activities relate to GlobeTel and its
      license.





Derivative
      Action





On
      July
      10, 2006 a derivative action was filed against the officers and directors of
      GlobeTel alleging that they have not acted in the best interest of the Company
      or the shareholders and alleged that the transaction to install wireless
      networks in Russia was a “sham.” The lawsuit is pending in the Federal District
      Court for the Southern District of Florida (Civil Case No. 06-60923). The
      Company believes that the suits are without merit and will vigorously defend
      against it. The Company has hired outside counsel to defend it in this action. The
      Company and the Plaintiff have reached an agreement in principle to settle
      this
      action and have submitted such settlement with the Court for its approval. Under
      the
      terms of the proposed settlement, Company’s D&O insurance carrier will pay
      $60,000 in attorneys’ fees to plaintiff’s counsel, the Company will implement or
      maintain certain corporate governance changes, and all claims will be dismissed
      with prejudice.




14





Former
      Consultants





We
      are a
      defendant in two lawsuits filed by Matthew Milo and Joseph Quattrocchi, two
      former consultants, filed in the Supreme Court of the State of New York
      (Richmond County, Case no. 12119/00 and 12118/00). These matters were
      subsequently consolidated as a result of an Order of the court and now bear
      the
      singular index number 12118/00. The original lawsuits were for breach of
      contract. The complaint demands the delivery of 10,000,000 pre split shares
      of
      ADGI stock to Milo and 10,000,000 to Quattrocchi. GlobeTel was entered into
      the
      action as ADGI was the predecessor of the Company. The suit also requests an
      accounting for the sales generated by the consultants and attorneys fees and
      costs for the action.





The
      lawsuits relate to consulting services that were provided by Mr. Milo and Mr.
      Quattrocchi and a $50,000 loan advanced by these individuals, dated May 14,
      1997, of which $35,000 has been repaid.





We
      entered into an agreement with Mr. Milo and Mr. Quattrocchi as consultants
      on
      June 25, 1998. The agreement was amended on August 15, 1998. On November 30,
      1998, both Mr. Milo and Mr. Quattrocchi resigned from their positions as
      consultants to our company without fulfilling all of their obligations under
      their consulting agreement. We issued 3 million pre split shares each to Mr.
      Milo and Mr. Quattrocchi as consideration under the consulting agreement. We
      have taken the position that Mr. Milo and Mr. Quattrocchi received compensation
      in excess of the value of the services that they provided and the amounts that
      they advanced as loans.





Mr.
      Milo
      and Mr. Quattrocchi disagreed with our position and commenced action against
      us
      that is pending in the Supreme Court of the State of New York. Mr. Milo and
      Mr.
      Quattrocchi claim that they are entitled to an additional 24,526,000 pre split
      shares of our common stock as damages under the consulting agreement and to
      the
      repayment of the loan balance. We believe that we have meritorious defenses
      to
      the Milo and Quattrocchi action, and we have counterclaims against Mr. Milo
      and
      Mr. Quattrocchi.





With
      regard to the issues related to original index number 12119/00, as a result
      of a
      summary judgment motion, the plaintiffs were granted a judgment in the sum
      of
      $15,000. The rest of the plaintiff's motion was denied. The court did not order
      the delivery of 24,526,000 pre split shares of ADGI common stock as the decision
      on that would be reserved to time of trial.





An
      Answer
      and Counterclaim had been interposed on both of these actions. The Answer denies
      many of the allegations in the complaint and is comprised of eleven affirmative
      defenses and five counterclaims alleging damages in the sum of $1,000,000.
      The
      counterclaims in various forms involve breach of contract and breach of
      fiduciary duty by the plaintiffs.





For
      the
      most part, the summary judgment motions that plaintiffs brought clearly stated
      that their theories of recovery and the documents that they will rely on in
      prosecuting the action. The case was assigned to a judicial hearing officer
      and
      there was one week of trial. The trial has been since adjourned with no further
      trial dates having been set.





It
      is
      still difficult to evaluate the likelihood of an unfavorable outcome at this
      time in light of the fact that there has been no testimony with regard to the
      actions. However, the plaintiffs have prevailed with regard to their claim
      of
      $15,000 as a result of the lawsuit bearing the original index Number
      12119/00.





This
      case
      went before a Judicial Hearing Officer on July 6 and 7, 2006. No resolution
      occurred during the July hearing and the Judicial Hearing Officer has asked
      for
      written statements of facts and law. The outcome cannot be projected with any
      certainty.  However, the company does not believe that it will be
      materially adversely affected by the outcome of the proceeding.





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





ANNUAL
      MEETING





On
      August
      11, 2005, by written consent of the majority vote of its shares at the Company's
      annual meeting, the shareholders re-elected the Company’s directors and approved
      all proposals. The directors included, Timothy Huff, Przemyslaw Kostro, Mitchell
      Siegel, Kyle McMahan, Laina Raveendran Greene, and Leigh Coleman. Additionally,
      proposals to ratify Dohan & Co. CPA's PA as our auditors, increase the
      number of authorized common shares from 100 million to 150 million (subsequent
      to the reverse split authorized in the preceding quarter), and ratify the 2004
      employee stock option plan were all approved.




15





The
      following table lists the number of votes cast for each matter, including a
      separate tabulation with respect to each nominee for office. There were no
      votes
      against and no abstentions. The total number of voting shares was 62,559,026.





Przemyslaw
                Kostro
            
            
            62,047,431Timothy
                Huff
            
            
            62,019,756Laina
                Raveendran Greene
            
            
            62,182,817Leigh
                Coleman
            
            
            62,126,151Mitchell
                A. Siegel
            
            
            62,043,609Kyle
                McMahan
            
            
            62,217,392Ratify
                the Company's appointment of Dohan and Company, CPAs, PA as independent
                auditors of the Company for the fiscal year ending December 31,
                2005
            
            
            61,865,684Increase
                the number of authorized common shares from 100,000,000 (One Hundred
                Million) to 150,000,000 (One Hundred Fifty Million)
            
            
            58,335,831Proposal
                to approve the 2004 Employee Stock Option Plan
            
            
            8,164,899
                (1
            )





(1)
      This
      represents a majority the votes cast on this issue. There were 50,799,309 broker
      non-votes.





There
      were no other matters brought to a vote of security holders 2005.





**PART
      II**





**ITEM
      5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
      MATTERS.**





(a)
      MARKET PRICE





Our
      shares of common stock were quoted on the Over-the-Counter Bulletin Board
      (OTCBB) quotation system under the symbol “GTEL." Effective May 6, 2005, by
      written consent of the majority vote of its shares, the Board of Directors
      approved a reverse split of our shares of common stock on a one for fifteen
      (1:15) basis, in preparation for our move to the American Stock Exchange, which
      occurred on May 23, 2005. All common stock amounts in this report have been
      retroactively restated to account for the reverse stock split, unless otherwise
      noted. Since its move to AMEX, GlobeTel stock has been traded under the symbol
      of “GTE". As of the date of this report, there are approximately 39 market
      makers in our common shares.





The
      following information sets forth the high and low bid price of our common stock
      during fiscal 2003, 2004 and 2005 and was obtained from the National Quotation
      Bureau. The quotations reflect inter-dealer prices, without retail mark-up,
      mark-down or commission and may not represent actual transactions.





*Value
      of
      shares recalculated based on the 1:15 reverse split effective May 25,
      2005





CALENDAR
                2003
            
            HIGH
            
            LOWQuarter
                Ended March 31
            
            $0.6600
                ($0.0440 pre-split)
            
            $0.3000
                ($0.0200 pre-split)Quarter
                Ended June 30
            
            $0.4350
                ($0.0290 pre-split)
            
            $0.2265
                ($0.0151 pre-split)Quarter
                Ended September 30
            
            $0.6000
                ($0.0400 pre-split)
            
            $0.2850
                ($0.0190 pre-split)Quarter
                Ended December 31
            
            $1.9650
                ($0.1310 pre-split)
            
            $0.3750
                ($0.0250 pre-split)CALENDAR
                2004Quarter
                Ended March 31
            
            $2.9400
                ($0.1960 pre-split)
            
            $0.7500
                ($0.0500 pre-split)Quarter
                Ended June 30
            
            $1.9500
                ($0.1300 pre-split)
            
            $1.2000
                ($0.0800 pre-split)Quarter
                Ended September 30
            
            $1.9200
                ($0.1280 pre-split)
            
            $1.0500
                ($0.0700 pre-split)Quarter
                Ended December 31
            
            $2.1000
                ($0.1400 pre-split)
            
            $0.1500
                ($0.0100 pre-split)CALENDAR
                2005Quarter
                Ended March 31
            
            $5.5500
                ($0.3700 pre-split)
            
            $0.4500
                ($0.0300 pre-split)Quarter
                Ended June 30
            
            $4.0500
            
            $2.2500
                ($0.1500 pre-split)Quarter
                Ended September 30
            
            $2.8800
            
            $1.1400Quarter
                Ended December 31
            
            $4.3400
            
            $1.2500





16




(b)
      HOLDERS





As
      of the
      date of this report, there were approximately 28,000 beneficial owners and
      1,400
      registered holders of our common stock.





(c)
      DIVIDENDS





We
      have
      never paid a dividend and do not anticipate that any dividends will be paid
      in
      the near future. We currently have no funds from which to pay dividends and
      as
      of December 31, 2005, our accumulated deficit was $81,521,980. We do not expect
      that any dividends will be paid for the foreseeable future.





(d)
      SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS





In
      September 2003, the board of directors authorized the issuance of stock options
      totaling 3,183,414 (47,751,200 pre-split) shares to the officers of the company
      in return for the forgiveness of $683,168 in accrued salaries and $33,100 in
      other accrued expenses through December 31, 2002. The stock options were
      exercisable at the lower of $.225 ($.015 pre-split) or 50% of the closing market
      price.





In
      December 2003, the board of directors authorized the issuance of stock options
      totaling 1,088,889 (16,333,333 pre-split) shares to the officers of the company
      in return for the forgiveness of $245,000 in accrued salaries through December
      31, 2003. The stock options were exercisable at the lower of $.225 ($.015
      pre-split) per share or 50% of the closing market price.





On
      January 8, 2004, the officers exercised their rights to convert the stock
      options into common stock at $.225 ($.015 pre-split) and as a result, we issued
      4,272,303 (64,084,533 pre-split) shares of common stock in January 2004, in
      accordance with the stock option agreements.





In
      May
      2004, the board of directors approved an Officers' Stock Option Grant Plan,
      pursuant to which certain officers are entitled to receive stock options, for
      each of three years, beginning in 2004 (Year 1). The annual number of option
      shares to be issued will be equal to amounts that, after the exercise of such
      options, would affect ownership of various percentages of the total shares
      then
      issued and outstanding. The following officers received options for shares
      in
      the following percentages: CEO - 3.0% in each of the three years (total 9.0%);
      COO - 2.0% in each of the three years (total 6.0%), CFO - 2.0% in Year 1.5%
      and
      1.5% in each of the following years (total 5.0%), former President - 1.0% in
      Year 1.0 and 0.5% in each of the following years (total 2.0%), current President
      - 1% in each of the three years (total 3.0%), and CTO - 1.0% in each of the
      three years (total 3.0%). The recipient’s rights to the options are fully
      vested, as of December 31, 2004, although compensation expense is recorded
      at
      the completion of each year. The total of 6,654,197 (99,812,946 pre-split)
      option shares were issued for 2004. The stock options are exercisable at the
      lower of $.675 ($0.045 pre-split) per share.





In
      December 2004, we established our 2004 Stock Option Bonus Plan, wherein the
      board of directors authorized the issuance of stock options totaling 1,765,833
      (26,487,483 pre-split) shares to the officers and employees of the company
      as
      payment of accrued bonuses through December 31, 2004. The stock options are
      exercisable at the lower of $.675 ($0.045 pre-split) per share or 50% of the
      closing market price at the date of exercise.





In
      December 2004, the board of directors authorized the issuance of stock options
      totaling 247,886 (3,718,279 pre-split) shares to the directors of the company
      as
      payment of accrued board members' stipends through December 31, 2004. The stock
      options are exercisable at the lower of $.5865 ($0.0391 pre-split) per share
      or
      50% of the closing market price on date of exercise.





In
      January 2005, the option holders exercised their rights to convert a portion
      of
      the stock options pursuant to the Officers Stock Grant Plan, the 2004 Stock
      Option Bonus Plan, and the options for accrued directors' stipends into common
      stock at $.675 ($0.045 pre-split), and, as a result, we issued 2,000,000
      (30,000,000 pre-split) shares of common stock in January 2005, in accordance
      with the stock option agreements.





In
      November 2005, the Company established its 2005 Stock Option Bonus Plan, wherein
      the board of directors authorized the issuance of stock options for restricted
      shares totaling 1,509,180 (post-split) shares to the officers and employees
      of
      the company as payment of accrued bonuses through December 31, 2005. The stock
      options are exercisable at $2.12, based on the closing market price of the
      Company's free-trading shares on the date the options were granted. Through
      the
      date of this report, none of these options have been exercised.





During
      2005, the board of directors authorized the issuance of stock options for
      restricted shares totaling 199,490 (pos-split) shares to the directors of the
      company as board members’ compensation for services through December 31, 2005.
      The stock options are exercisable at various amounts, ranging from $1.99 to
      $4.35 per share, based on the closing market price of the Company's free-trading
      shares on the date the options were granted, except for a now former director
      who was issued 37,500 and 30,000 (post-split) options shares at $1.49 and $0.99,
      respectively. Through the date of this report, none of these options have been
      exercised.




17





In
      addition to the above parties, the corporate Secretary / general counsel and
      the
      Senior Vice-President were awarded 1% and 2%, respectively, of the total shares
      outstanding, at the fair market value of the Company's stock on the date the
      options were granted. Also, a board member, Randolph Dumas, was awarded 2.5%
      of
      the total shares outstanding, exercisable at $1.79 per share. A total of
      13,992,374 and 6,654,196 (post-split) options shares were granted for
      2005.





2004
      STOCK OPTIONS EXERCISED IN 2005





During
      2005, a total of 1,785,490 (26,782,350 post-split) of stock options shares
      were
      exercised and issued (net of shares used to pay for "cashless" options"), with
      payment in cash and common stock subscriptions receivable totaling $92,906,
      pursuant to the 2004 Stock Option Bonus Plan, the Officers' Stock Option Grant
      Plan, and for accrued board members' stipends, and, furthermore, these shares
      were registered by the Company's filing a Form S-8 registration statement.
      The
      number of shares registered were allocated to the individuals exercising the
      options based a ratio of the number of options held by each individual to the
      total number of options held by all individuals.





In
      addition, certain employees, vendors, professionals and consultants were paid
      with common stock (see Note 25 to financial statements) and with stock options
      (see Note 26 to financial statements) and certain investment banking and
      broker's fees were paid with preferred stock (see Note 27 to financial
      statements) in lieu of cash compensation.





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





GENERAL





Twelve
      months ended December 31, 2005 ("Fiscal 2005" or "2005" or "the current year")
      compared to twelve months ended December 31, 2004 ("Fiscal 2004" or "2004"
      or
      "the prior year").





RESULTS
      OF OPERATIONS





REVENUES.
      During fiscal 2005, our gross sales were $10,144,780, representing a decrease
      of
      10.3% over the prior year when our gross sales were $11,309,376. Our revenues
      decreased primarily due to a decrease in revenues associated with Brazil
      network. The majority of our revenues were predominately from telecommunications
      minutes going through our Philippines network through September 2005. Thereafter
      substantially all of our wholesale traffic revenues were significantly
      reduced.





Our
      Philippines network generated $7,674,615 (or 76% of gross revenues). Other
      domestic and international wholesale traffic revenues were $2,358,020 (or 23%
      of
      gross revenues).





Additional
      revenues generated included $109,023 from our Magic Money program as compared
      to
      $69,845 in the prior year and $3,154 from the sale of IP Phones for the current
      year as compared to $7,717 in the prior year. No revenues were generated from
      our Store Value Card program for the current year as compared to $9,515 in
      the
      prior year.





COST
      OF
      SALES. Our cost of sales consists primarily of the wholesale cost of buying
      bandwidth purchased by us for resale, collocations costs, technical services,
      wages, equipment leases, and the costs of telecommunications equipment. We
      had
      cost of sales of $9,731,083 for fiscal 2005, compared to $11,500,577 for fiscal
      2004. We expect cost of sales to increase or decrease in future periods to
      the
      extent that our sales volume increases or decreases.





GROSS
      MARGIN (LOSS). Our gross margin was $413,697 or 4.1% for fiscal 2005, compared
      to a gross loss of ($191,201) or (-1.7%) of total revenues in fiscal 2004,
      an
      increase of $604,898 or 316.4%. The increase is primarily due to the fact that
      there were higher margins on resale of wholesale minutes related to the
      decreased cost of the minutes to terminate.





OPERATING
      EXPENSES. Our operating expenses consist primarily of payroll and related taxes,
      professional and consulting services, expenses for executive and administrative
      personnel and insurance, bad debts, investment banking and financing fees,
      investor and public relations, research and development, sales commissions,
      telephone and communications, facilities expenses, travel and related expenses,
      and other general corporate expenses. Our operating expenses for fiscal 2005
      were $37,756,045 compared to fiscal year 2004 operating expenses of $15,628,250
      an increase of $22,127,795 or 141.6%.





The
      increase is primarily due to an increase in officers' and directors'
      compensation to $12,082,809 (including non-cash compensation), from $6,520,206
      in the prior year. During fiscal 2005, total officers' and directors'
      compensation, included non-cash equity compensation (stock and stock options)
      of
      $10,799,267, compared to $5,805,046 in non-cash compensation during fiscal
      2004.




18





In
      addition, employee payroll and related taxes for fiscal 2005 were $3,118,676
      compared to $1,248,562 compared, an increase of $1,870,114 or 149.8%. This
      increase was due to expansion of our operations, facilities and workforce from
      30 total employees to 65 during 2005, and included in non-cash equity
      compensation (stock and stock options) for employees was $439,818 in fiscal
      2005
      compared to $438,187 in fiscal 2004.





We
      incurred $6,200,054 of consulting and professional fees, an increase of
      $3,993,817 or 181.0% for 2005 (including $4,288,867 in non-cash equity
      compensation) compared to $2,206,237 in 2004 (including $325,000 in non-cash
      equity compensation). These increases are related to additional services
      required to develop and expand our geographical and product markets and
      projects, including our Stored Value Program and international markets (such
      as
      Australia, India and Philippines) as well as increased professional fees in
      maintaining and expanding a public company, including our move to the American
      Stock Exchange. Our consulting and professional fees include such expenses
      as
      computer consulting, technical consulting, accounting and legal fees.





We
      incurred $9,494,223 of research and development costs for our Sanswire project
      and our GlobeTel Wireless business during 2005, compared to $3,038,085 in 2004,
      a increase of $6,456,138 or 212.5%. During 2005, $2,104,559 of these costs
      represent direct expenses of development and building of the airship, as
      compared to $156,051 of direct expenses during 2004. This is due mainly to
      the
      fact that the first prototype airship was completed during 2005.





We
      incurred $848,880 of sales commission for our Centerline operations during
      2005,
      compared to $404,747 during fiscal 2004, an increase of $444,133 or 109.7%.
      These commissions are based on the agreement between Carrier Services, Inc.
      ("CSI") and the Company where Centerline is to build telecommunication revenues
      and a client base, utilizing each party's network and financial resources and
      to
      engage in any other business or activity that is necessary and proper. Pursuant
      to the agreement, the Company was responsible for all costs associated with
      the
      operation and maintenance of the Prepaid Calling Card Platform, all expenses
      related to funding, staffing, technical support, customer service, equipment,
      and credit facilities. CSI was responsible for all costs and responsibilities
      associated with operation of the termination network, providing network
      facilities for the termination of carrier traffic, administer and operate the
      termination network, including subscriber accounts and tracking of minutes,
      all
      training and salary expenses of its sales personnel, all marketing expenses
      connected with the sale of the calling services and all other organizations
      related expense in any foreign base operation in which the LLC is
      operating.





The
      agreement provided for minimum selling requirements of $50 million per year
      in
      revenues for the LLC. If the LLC brought in $50 million in revenues at the
      end
      of the first year of operation, CSI will receive $1 million of the company's
      publicly traded stock. If CSI repeats the $50 million in revenues in year two,
      CSI would receive another $1 million of the company's publicly traded stock.
      The
      initial term of the agreement was for two years and automatically renewable
      for
      another two years. The parties subsequently modified the agreement to provide
      for minimum selling requirements of $25 million in revenues for the LLC. Upon
      the LLC achieving in $25 million in revenues, CSI will receive 333,333 (5
      million pre-split) shares of the company's publicly traded stock.





During
      2005, we incurred $788,985 of investment and broker fees as compared to $172,106
      during 2004. The $616,879 increase is due to 2005 equity funding related to
      subscription agreements with investors for 5% convertible notes and from private
      placements executed (see note 18).





LOSS
      FROM
      OPERATIONS. We had an operating loss of ($39,082,945) for fiscal year 2005
      as
      compared to an operating loss of ($15,944,869) for fiscal 2004, primarily due
      to
      increased operating expenses as described above, including higher operating
      costs and expansion of our various programs. We expect that we will continue
      to
      have higher operating costs as we increase our staffing and continue expanding
      operations, programs, projects and operating costs related to our newly acquired
      subsidiaries.





OTHER
      INCOME (EXPENSE). We had net other expenses totaling ($1,740,597) during fiscal
      year 2005 compared to ($125,418) during fiscal 2004. This variance was due
      primarily to a global settlement with a former officer of the company. In 2005
      the company had a loss on the settlement of an agreement to deploy
      telecommunications in Asia with a related party, Sky China Limited, for
      ($1,256,873). Also during 2005, the company wrote-off its investment in CGI
      for
      ($352,300).





Fiscal
      year 2004 included $268,397 in net gains on the settlements of liabilities.
      Various liabilities, representing disputed obligations, were settled for amounts
      less than the previously recorded values, pursuant to agreements between us
      and
      the vendors. We had interest income of $44,368 in fiscal year 2005 compared
      to
      $2,067 in fiscal 2004. Other expense of ($56,804) in fiscal 2004 was a result
      of
      losses realized on the disposition of fixed assets.





Interest
      expense for fiscal year 2005 was $175,792 compared to $189,520 for the prior
      year. Interest expense decrease was primarily due to a reduction in accrual
      of
      contractual financing charges in connection with the operations of our
      Centerline subsidiary. This is also a result of our debt reduction strategy.




19





NET
      LOSS.
      We had a net loss of ($39,082,945) in fiscal year 2005 compared to a net loss
      of
      ($15,944,869) in fiscal 2004. The net loss is primarily attributable to the
      increase in the operating expenses as discussed above.





LIQUIDITY
      AND CAPITAL RESOURCES





ASSETS.
      At December 31, 2005, we had total assets of $10,411,522 compared to total
      assets of $3,417,977 as of December 31, 2004.





The
      current assets at December 31, 2005, were $3,330,778 compared to $2,561,197
      at
      December 31, 2004. As of December 31, 2005, we had $1,228,180 of cash and cash
      equivalents compared to $601,559 at December 31, 2004.





The
      Company had restricted cash of $1,122,000 as of December 31, 2005 representing
      security for letters of credit to suppliers for MasterCard in the amount of
      $1,000,000 in support of the Store Value Card program, a rental deposit for
      Los
      Angeles World Airport related to the Palmdale Hanger occupied by Sanswire
      Networks, LLC in the amount of $72,000 and for a wholesale carrier in the amount
      of $50,000. No such letters of credit to vendors existed as of December 31,
      2004. As of the date of this report the Company canceled the MasterCard letter
      of credit and used the collateral for working capital purposes. The rent deposit
      with LAWA was used to pay rent obligations on the Palmdale Hangar, that is
      no
      longer occupied by Sanswire.





Our
      net
      accounts receivable, which consisted of 22 customers, were $371,618 as of
      December 31, 2005 compared to $1,740,883 as of December 31, 2004. For 2004,
      the
      company wrote-off $1,096,631 of customer receivables deemed to be uncollectible.
      Approximately 92% of the December 31, 2004 receivables were attributable to
      three customers, including 63% or $773,319 (net of allowance) related to the
      Mexico network and 22% or $266,167 (net of allowance) related to the Brazil
      network. We have increased our allowance for doubtful accounts by $1,141,534
      for
      the year, the substantial portion of which relates to two of these three
      customers.





Other
      current assets included $185,960 of prepaid expenses to a related party ISG
      Jet,
      LLC, and $184,434 in prepaid expenses, primarily prepaid minutes with carriers,
      compared to $58,900 in 2004; $67,525 inventory of IP Phones in 2005, compared
      to
      $63,976 in 2004, and deposits on equipment purchases and other current assets
      of
      $124,993 in 2005, compared to $88,994 in 2004 related to additional deposits
      made for the Mastercard Switch which was not operational as of December 31,
      2005.





Property
      and Equipment as of December 31, 2005 was $7,028,422 as compared to $445,756
      at
      December 31, 2004. The variance is due primarily to an increase in
      telecommunications equipment in the amount of $6,104,526, which was due
      primarily to the acquisition of the new Mastercard switch $5,267,526 and
      $837,000 for the acquisition of the new telecommunications switch acquired
      by
      our subsidiary Centerline Communications.





LIABILITIES.
      At December 31, 2005, we had total liabilities of $9,906,933 compared to total
      liabilities of $919,400 as of December 31, 2004.





The
      current liabilities at December 31, 2005 were $5,198,766 compared to $914,682
      at
      December 31, 2004, an increase of $4,284,084. The increase is principally due
      to
      the current portion of payments due to related party - Hotzone Wireless for
      $2,451,834 (see note 9) and to Carrier Services, Inc. for $901,606 and a payable
      due to former employee of $237,600 (see note 13)





Long-term
      liabilities increased to $4,708,167 due to the non-current portion of the due
      to
      a related party - Hotzone Wireless, (see note 9) as compared to $4,718 as of
      December 31, 2004, which represented the non-current portion of capital
      leases.





CASH
      FLOWS. Our cash used in operating activities was $12,610,149 compared to
      $4,467,989 for the prior year. The increase was primarily due to the increased
      level of operations and operating activities and changes in our current assets
      and liabilities.





Our
      cash
      used in investing activities was $2,084,559 which was mainly attributed to
      cash
      payments made towards the purchase of our Telecommunications switch in
      Centerline and the MasterCard Switch, compared to $356,570 in the prior
      year.





Net
      cash
      provided by financing activities was $15,321,329 principally from the sale
      of
      common stock and the conversion of notes and loan payables totaling $13,271,957,
      as compared to $5,201,124 in the prior year.





In
      order
      for us to pay our operating expenses during 2005 and 2004, including certain
      operating expenses for our wholly-owned subsidiaries, Centerline and Sanswire,
      and the overall expansion of our operations, we raised $500,000 in sales of
      preferred stock in 2005, compared to $5,157,500 in sales of preferred stock
      in
      2004. We raised $13,271,957 from loans and notes payable related to the exercise
      of warrants by convertible note holders and private placements, compared to
      $375,000 in the prior year.





As
      detailed in the financial statements, we have stock subscriptions receivable
      for
      preferred shares that will raise a total of $500,000 in cash in 2006, primarily
      in the form of financing provided by Series D preferred shareholders. In January
      2006, we received approximately $6.8 million from the exercise of warrants
      by
      certain investors. With this funding, as well as the additional funding, we
      will
      have the existing capital resources necessary to fund our operations and capital
      requirements as presently planned over the next twelve months.




20





We
      raised
      an additional approximately $5 million in equity placements in 2005. Throughout
      2006 and continuing into 2007, the Company has been dependent upon monthly
      funding from its existing debt holders. Funding decisions have typically not
      extended beyond thirty days at any given time, and the Company does not
      currently have a defined funding source. Funding delays and uncertainties have
      seriously damaged vendor relationships, new product development and revenues.
      In
      the absence of continued monthly funding by its current debt holders, the
      Company would have insufficient funds to continue operations. There is no
      assurance that additional funding from the current debt holders will be
      available, or available on terms and conditions acceptable to the
      Company.





As
      reflected in the accompanying financial statements, during the year ended
      December 31, 2005 we had a net loss of ($39,082,945) compared to a net loss
      of
      ($15,944,869) during 2004. Consequently, there is an accumulated deficit of
      ($81,521,980) at December 31, 2005 compared to ($42,439,036) at December 31,
      2004.





**General**





Twelve
      months ended December 31, 2004 ("Fiscal 2004" or "2004" or "the current year")
      compared to twelve months ended December 31, 2003 ("Fiscal 2003" or "2003"
      or
      "the prior year").





**Results
      of Operations**





**Revenues.** During
      the fiscal 2004, our gross sales were $11,309,376, representing a decrease
      of
      0.4% over the prior year when our gross sales were $11,351,939. Our revenues
      remained consistent due to the fact that wholesale telecommunications revenues
      were being moved from GlobeTel Communications to the subsidiary, Centerline
      which was better suited for wholesale traffic revenues (telecommunications
      minutes). The revenues continued to be predominantly from telecommunications
      minutes going through our Mexico, Philippines and Brazil networks through June
      2004.





Our
      Mexico network generated $4,774,657 (or 42.2% of gross revenues), while our
      Philippines network generated $3,234,279 (or 28.6% of gross revenues) and our
      Brazil network generated $2,147,119 (or 19.0% of gross revenues). Other domestic
      and international wholesale traffic revenues were $1,065,656 (or 9.4% of gross
      revenues), including revenues $469,821 (or 4.1% of gross revenue) from Mexico
      (unrelated to our Mexico network).





Additional
      revenues generated included $9,515 from our Stored Value Card program, $69,845
      from our Magic Money program and $7,717 from the sale of IP Phones. There were
      no sales from these programs in the prior year.





**Cost
      of Sales** .
      Our
      cost of sales consists primarily of the wholesale cost of buying bandwidth
      purchased by us for resale, collocations costs, technical services, wages,
      equipment leases, and the costs of telecommunications equipment. We had cost
      of
      sales of $11,500,577 for fiscal 2004, compared to $8,840,872 for fiscal 2003.
      We
      expect cost of sales to increase in future periods to the extent that our sales
      volume increases.





**Gross
      Margin (Loss)** .
      Our
      gross margin (loss) was ($191,201) or (0.66%) for fiscal 2004, compared to
      $2,511,067 or 22.12% of total revenues in fiscal 2003, a decrease of $2,702,268
      or (107.6%). The decrease is primarily due to the fact that there was lower
      margin on resale of wholesale minutes related to the increased cost of the
      minutes to terminate, especially the Mexico network, where our margin was less
      than two percent, and initial activities of Centerline, where our gross margin
      was minimal or zero.





**Operating
      Expenses.** Our
      operating expenses consist primarily of payroll and related taxes, professional
      and consulting services, expenses for executive and administrative personnel
      and
      insurance, bad debts, investment banking and financing fees, investor and public
      relations, research and development, sales commissions telephone and
      communications, facilities expenses, travel and related expenses, and other
      general corporate expenses. Our operating expenses for fiscal 2004 were
      $15,628,250 compared to fiscal 2003 operating expenses of $3,805,388, an
      increase of $11,822,862 or 311%.





The
      increase is primarily due to an increase in officers' and directors'
      compensation to $6,520,206, including non-cash compensation, from $595,000
      in
      the prior year. During fiscal 2004, total officers' and directors' compensation
      included non-cash equity compensation (stock and stock options) of $5,805,646,
      compared $185,000 in non-cash compensation during fiscal 2003.





In
      addition, employee payroll and related taxes for fiscal 2004 were $1,248,562
      compared to $283,408, an increased by $965,154 or 340.6%. This increase was
      due
      to expansion of our operations, facilities and workforce from 15 total employees
      to 30 during 2004. Included in non-cash equity compensation (stock and stock
      options) for employees was $438,187 in fiscal 2004, compared to $86,000 in
      fiscal 2003. Consulting and professional fees increased by $1,487,250 or 206.9%,
      to $2,206,237 in 2004 (including $325,000 in non-cash equity compensation),
      compared to $718,987 in 2003 (including $203,607 in non-cash equity
      compensation). These increases are related to additional services required
      to
      develop and expand our geographical and product markets and projects, including
      our Stored Value Program, our Sanswire Project, and international markets,
      primarily in Asia and Australia, as well as increased professional fees in
      maintaining and expanding a public company.




21





We
      incurred $3,038,085 of research and development costs for our Sanswire project
      -
      development of the Stratellite during fiscal 2004, compared to none in the
      prior
      year, whereas the Sanswire assets was acquired in April 2004.





We
      incurred $404,747 of sales commissions for our Centerline operations during
      fiscal 2004, compared to none in the prior year, whereas the Centerline
      operations began in 2004.





**Income
      (Loss) from Operations** .
      We had
      an operating loss of ($15,819,451) for fiscal 2004 as compared to an operating
      loss of ($1,294,321) for fiscal 2003, primarily due to the excess of costs
      of
      revenues earned over revenues earned and increased operating expenses as
      described above, including reduced margins and higher operating costs and
      expansion of our various programs. We expect that we will continue to have
      higher operating costs as we increase our staffing and continue expanding
      operations, programs, projects and operating costs related to our newly acquired
      subsidiaries.





**Other
      Income (Expense)** .
      We had
      net other expenses totaling $125,418 during fiscal 2004 compared to $4,908,205
      during fiscal 2003.





Other
      income during fiscal 2004 included $268,397 in net gains on the settlements
      of
      liabilities, compared to $26,274 in 2003. Various liabilities, representing
      disputed obligations, were settled for amounts less than the previously recorded
      values, pursuant to agreements between us and the vendors. We also reported
      a
      net gain of $55,842 in 2003 in connection with the closing of operations of
      our
      St. Louis, Missouri office after accounting adjustments were made. We had
      interest income of $2,067 in fiscal 2004 compared to none in fiscal
      2003.





Other
      expense of $56,804 in fiscal 2004 was a result of losses realized on the
      disposition of fixed assets, compared to a loss of $42,301 in fiscal 2003.
      Other
      expense of $4,834,878 in fiscal 2003 was as a result of the write-off of assets
      and liabilities resulting from the transactions in Australia with
      IPW.





Interest
      expense for fiscal 2004 was $189,520 compared to $113,142 during fiscal 2003.
      Interest expense increase was primarily due to the accrual of contractual
      financing charges in connection with the operations of our Centerline
      subsidiary. Other interest charges actually decreased in 2004, as result in
      reduction of our total debts.





**Net
      Income (Loss)** .
      We had
      a net loss of ($15,944,869) in fiscal 2004 compared to a net loss of
      ($6,202,526) in fiscal 2003. The net loss is primarily attributable to the
      increase in the operating expenses as discussed above.





**Liquidity
      and Capital Resources**





**Assets** .
      At
      December 31, 2004, we had total assets of $3,417,977 compared to total assets
      of
      $4,144,231 as of December 31, 2003.





The
      current assets at December 31, 2004, were $2,561,197, compared to $3,389,421
      at
      December 31, 2003. As of December 31, 2004, we had $601,559 of cash and cash
      equivalents compared to $224,994 as of December 31, 2003.





Our
      net
      accounts receivable were $1,740,883 as of December 31, 2004, compared to
      $3,039,427 at the same point in 2003. Approximately 92% of the December 31,
      2004
      receivables were attributable to three customers, including 63% or $773,319
      (net
      of allowance) related to the Mexico network and 22% or $266,167 (net of
      allowance) related to the Brazil network. We have increased our allowance for
      doubtful accounts by $1,141,534 for the year, the substantial portion of which
      relates to two of these three customers.





Other
      current assets included $58,900 in prepaid expense, primarily prepaid minutes
      with carriers, compared to $71,000 in 2003; $63,976 inventory of IP Phones,
      compared to none in the prior year; and deposits on equipment purchases and
      other current assets of $88,994 compared to none in 2003.





We
      had
      other assets totaling $411,024 as of December 31, 2004, compared to $318,435
      as
      of December 31, 2003. The increase was attributable primarily to the additional
      investments of $50,000 in CGI, our unconsolidated foreign subsidiary, totaling
      $352,300 as of December 31, 2004.





**Liabilities** .
      At
      December 31, 2004, we had total liabilities of $919,400 compared to total
      liabilities of $1,908,686 as of December 31, 2003.




22





The
      current liabilities at December 31, 2004 were $914,682 compared to $1,908,686
      at
      December 31, 2003, a decrease of $994,004. The decrease is principally due
      to
      payments of notes and loans payable, payment of accounts and loans payable
      to
      related parties with stock, and a reduction in accounts payable. There were
      no
      significant long-term liabilities as of December 31, 2004 and 2003.





**Cash
      Flows** .
      Our
      cash used in operating activities was ($4,467,989) for 2004, compared to
      ($1,389,102) for the prior year. The increase was primarily due to the increased
      level of operations and operating activities and changes in our current assets
      and liabilities.





Our
      cash
      used in investing activities, including acquisitions of property and equipment
      investment in CGI, and loans to employees for a total of ($356,570) compared
      to
      ($607,401) in the prior year.





Net
      cash
      provided by financing activities was $5,201,124, principally from the sale
      of
      preferred stock, for 2004, as compared to $2,019,686, principally from the
      sale
      of preferred and common stock and proceeds from notes and loans payable, for
      the
      prior year.





In
      order
      for us to pay our operating expenses during 2004 and 2003, including certain
      operating expenses of our wholly-owned subsidiaries, Sanswire and Centerline,
      and the overall expansion of our operations, we raised $5,157,500 from sales
      of
      preferred stock in 2004, compared $717,140 and $500,000 from sales of preferred
      stock and common stock, respectively in 2003. We also raised $60,000 and
      $144,194 from proceeds from related party payables in 2004 and 2003,
      respectively. We generated $375,000 and $784,259 from loans and notes payable
      in
      2004 and 2003, respectively.





In
      April
      2004, Caterham Financial Management Ltd., subscribed for 35,000 shares of Series
      B Preferred Stock. Originally, the Series B Preferred allowed the purchaser
      to
      convert such shares for up to 35% of the then outstanding shares of common
      stock
      of the Company. However, prior to the Company listing on the American Stock
      Exchange in 2005, the Company and Caterham agreed to fix the number of shares
      to
      which the Series B Preferred could be converted to 193,970,000 shares (prior
      to
      giving effect to the May 2005 reverse split). Caterham subsequently converted
      all their Series B Preferred Shares.




We
      raised
      an additional approximately $5 million in equity placements in 2005. We do
      not
      have existing capital resources or credit lines available that are sufficient
      to
      fund our operations and contractual obligations as presently planned over the
      next twelve months. Throughout 2006 and continuing into 2007, the Company has
      been dependent upon monthly funding from its existing debt holders. Funding
      decisions have typically not extended beyond thirty days at any given time,
      and
      the Company does not currently have a defined funding source. Funding delays
      and
      uncertainties have seriously damaged vendor relationships, new product
      development and revenues. In the absence of continued monthly funding by its
      current debt holders, the Company would have insufficient funds to continue
      operations. There is no assurance that additional funding from the current
      debt
      holders will be available, or available on terms and conditions acceptable
      to
      the Company.





As
      reflected in the accompanying financial statements, during the year ended
      December 31, 2004, we had a net loss of ($15,944,869) compared to a net loss
      of
      ($6,202,526) during 2003. Consequently, there is an accumulated deficit of
      ($42,439,036) at December 31, 2004, compared to ($26,494,167) at December 31,
      2003.




23




**ITEM
      7. FINANCIAL STATEMENTS**





GLOBETEL
      COMMUNICATIONS CORP. AND SUBSIDIARIES


CONSOLIDATED
      FINANCIAL STATEMENTS


DECEMBER
      31, 2005, 2004 AND 2003




TABLE
      OF
      CONTENTS





**Page**REPORT
                OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMCONSOLIDATED
                FINANCIAL STATEMENTS
            
            
            25Consolidated
                Balance Sheets
            
            
            26Consolidated
                Statements of Operations
            
            
            27Consolidated
                Statements of Cash Flows
            
            
            28Consolidated
                Statements of Stockholders' Equity
            
            
            30Notes
                to Consolidated Financial Statements
            
            
            35





24


Dohan
                  and Company
              
              7700
                  North Kendall Drive, 200Certified
                  Public Accountants
              
              Miami,
                  Florida 33156-7564A
                  Professional Association
              
              Telephone:
                  (305) 274-1366Facsimile:
                  (305) 274-1368E-mail:
                  info@uscpa.comInternet:
                  www.uscpa.com


**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**




To
      the
      Board of Directors and Stockholders


Globetel
      Communications Corp. and Subsidiaries


Ft.
      Lauderdale, Florida




We
      have
      audited the accompanying consolidated balance sheets of Globetel Communications
      Corp. and Subsidiaries (the Company) as of December 31, 2005 and 2004, and
      the
      related consolidated statements of income (loss), cash flows and stockholders’
equity for the years then ended December 31, 2005, 2004 and 2003. These
      consolidated financial statements are the responsibility of the Company’s
      management. Our responsibility is to express an opinion on these consolidated
      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 audit to obtain reasonable assurance about whether the
      consolidated financial statements are free of material misstatement. The Company
      is not required to have, nor were we engaged to perform, an audit of its
      internal control over financial reporting. Our audit included consideration
      of
      internal control over financial reporting as a basis for designing audit
      procedures that are appropriate in the circumstances, but not for the purpose
      of
      expressing an opinion on the effectiveness of the Company’s internal control
      over financial reporting. Accordingly, we express no such opinion. An audit
      also
      includes examining, on a test basis, evidence supporting the amounts and
      disclosures in the consolidated 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 consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of Globetel Communications
      Corp. and Subsidiaries as of December 31, 2005 and 2004, and the results of
      their operations and their cash flows for the years then ended December 31,
      2005, 2004 and 2003 in conformity with U.S. generally accepted accounting
      principles.





As
      described in Note 2 to the financial statements, the 2005 and 2004 financial
      statements have been restated for an error in the method of revenue recognition
      related to reporting gross revenue versus net as per EITF 99-19 and in the
      application of an accounting principle relating to purchase
      accounting.





Miami,
      Florida


March
      13,
      2006 except as to Note 2, which is November 30, 2007





/s/
                Dohan & Company, CPAs




Member:




Florida
      Institute of Certified Public Accountants




American
      Institute of Certified Public Accountants Private Companies and SEC Practices
      Sections National and worldwide associations through Accounting Group
      International




25


**GLOBETEL
      COMMUNICATIONS CORP. AND SUBSIDIARIES**


**CONSOLIDATED
      BALANCE SHEETS**




DEC.
                  31, 2005
              
              DEC.
                  31, 2004(restated)
              
              (restated)ASSETSCURRENT
                  ASSETSCash
                  and cash equivalents
              
              $
              1,228,180
              
              $
              601,559Restricted
                  cash
              
              
              1,122,000
              
              
              —Accounts
                  receivable, less allowance for doubtfulaccounts
                  of $409,100 and $1,505,731
              
              
              371,618
              
              
              1,740,883Loans
                  to employees
              
              
              46,068
              
              
              6,885Prepaid
                  expenses
              
              
              184,434
              
              
              58,900Prepaid
                  expenses - related party, ISG Jet, LLC
              
              
              185,960
              
              
              —Inventory
              
              
              67,525
              
              
              63,976Deposits
                  on equipment purchase
              
              
              124,993
              
              
              88,994Deferred
                  tax asset, less valuation allowance of$9,828,700
                  and $5,163,407
              
              
              —
              
              
              —TOTAL
                  CURRENT ASSETS
              
              
              3,330,778
              
              
              2,561,197PROPERTY
                  AND EQUIPMENT, NET
              
              
              7,028,422
              
              
              445,756OTHER
                  ASSETSInvestment
                  in unconsolidated foreign subsidiary -Consolidated
                  Global Investments, Ltd.
              
              
              —
              
              
              352,300Deposits
              
              
              52,322
              
              
              50,712Prepaid
                  expenses
              
              
              —
              
              
              8,012TOTAL
                  OTHER ASSETS
              
              
              52,322
              
              
              411,024TOTAL
                  ASSETS
              
              $
              10,411,522
              
              $
              3,417,977LIABILITIES
                  AND STOCKHOLDERS' EQUITYCOMMITMENTS
                  AND CONTINGENCIES (NOTES 6, 7, 17, AND 18)
              
              
              —
              
              
              —LIABILITIESCURRENT
                  LIABILITIESAccounts
                  payable
              
              $
              907,208
              
              $
              456,248Current
                  portion of long-term debt
              
              
              —
              
              
              2,846Due
                  to related party - Carrier Services, Inc.
              
              
              901,606
              
              
              —Due
                  to former employee payable in GTE stock
              
              
              237,600
              
              
              —Due
                  to related party payable in GTE Stock -Hotzone
                  Wireless, Inc. - short-term portion
              
              
              2,451,834
              
              
              —Accrued
                  officers' and directors' compensation
              
              
              97,382
              
              
              198,333Accrued
                  expenses and other liabilities
              
              
              545,636
              
              
              93,436Deferred
                  revenues
              
              
              —
              
              
              46,319Related
                  party payables
              
              
              57,500
              
              
              117,500TOTAL
                  CURRENT LIABILITIES
              
              
              5,198,766
              
              
              914,682LONG-TERM
                  LIABILITIESDue
                  to related party payable in GTE Stock -Hotzone
                  Wireless, Inc.
              
              
              4,708,167
              
              
              —Capital
                  lease obligations
              
              
              —
              
              
              4,718TOTAL
                  LONG-TERM LIABILITIES
              
              
              4,708,167
              
              
              4,718TOTAL
                  LIABILITIES
              
              $
              9,906,933
              
              $
              919,400STOCKHOLDERS'
                  EQUITYSeries
                  A Preferred stock, $.001 par value, 10,000,000 shares
                  authorized;0
                  and 96,500 shares issued and outstanding:
              
              
              —
              
              
              97Additional
                  paid-in capital - Series A Preferred stock
              
              
              —
              
              
              697,403Series
                  B Preferred stock, $.001 par value, 35,000 shares
                  authorized;0
                  and 35,000 shares issued and outstanding:
              
              
              —
              
              
              35Additional
                  paid-in capital - Series B Preferred stock
              
              
              —
              
              
              14,849,965Series
                  C Preferred stock, $.001 par value, 5,000 shares
                  authorized;500
                  and 750 shares issued and outstanding:
              
              
              —
              
              
              1Additional
                  paid-in capital - Series C Preferred stock
              
              
              —
              
              
              749,999Series
                  D Preferred stock, $.001 par value, 5,000 shares
                  authorized;1,000
                  shares issued and outstanding:
              
              
              1
              
              
              1Additional
                  paid-in capital - Series D Preferred stock
              
              
              999,999
              
              
              999,999Common
                  stock, $.00001 par value, 150,000,000 shares authorized;98,192,101
                  and 63,389,976 shares issued and outstanding
              
              
              982
              
              
              9,508Additional
                  paid-in capital
              
              
              81,570,082
              
              
              39,880,605Stock
                  subscriptions receivable:Series
                  B Preferred Stock
              
              
              —
              
              
              (11,500,000
              )Series
                  D Preferred Stock
              
              
              (500,000
              )
              
              (750,000
              )Common
                  Stock
              
              
              (44,494
              )
              
              —Accumulated
                  deficit
              
              
              (81,521,980
              )
              
              (42,439,036
              )TOTAL
                  STOCKHOLDERS' EQUITY
              
              
              504,589
              
              
              2,498,577TOTAL
                  LIABILITIES AND STOCKHOLDERS' EQUITY
              
              $
              10,411,522
              
              $
              3,417,977




**See
                  accompanying notes.**




26


**GLOBETEL
      COMMUNICATIONS CORP. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**FOR
      THE YEARS ENDED DECEMBER 31,**


2005
              
              2004
              
              2003(restated)
              
              (restated)REVENUES
                  EARNED
              
              $
              10,144,780
              
              $
              11,309,376
              
              $
              11,351,939COST
                  OF REVENUES EARNED
              
              
              9,731,083
              
              
              11,500,577
              
              
              8,840,872GROSS
                  MARGIN(LOSS)
              
              
              413,697
              
              
              (191,201
              )
              
              2,511,067EXPENSESPayroll
                  and related taxes
              
              
              3,118,676
              
              
              1,248,562
              
              
              283,408Consulting
                  and professional fees
              
              
              6,200,054
              
              
              2,206,237
              
              
              718,987Officers'
                  and directors' compensation
              
              
              12,082,809
              
              
              6,520,206
              
              
              595,000Bad
                  debts
              
              
              1,373,458
              
              
              1,141,534
              
              
              1,409,994Investment
                  banking and financing fees
              
              
              788,985
              
              
              172,106
              
              
              223,886Investor
                  and public relations
              
              
              550,460
              
              
              117,856
              
              
              121,656Commissions
                  expense - related party Carrier Services, Inc.
              
              
              848,880
              
              
              404,747
              
              
              —Research
                  and development
              
              
              9,494,223
              
              
              3,038,085
              
              
              —Other
                  operating expenses
              
              
              826,101
              
              
              156,011
              
              
              92,715Telephone
                  and communications
              
              
              200,129
              
              
              75,390
              
              
              69,169Travel
                  and related expenses
              
              
              882,557
              
              
              240,862
              
              
              95,213Rents
              
              
              480,995
              
              
              126,424
              
              
              48,607Insurance
                  and employee benefits
              
              
              672,700
              
              
              126,644
              
              
              102,383Depreciation
                  and amortization
              
              
              236,018
              
              
              53,586
              
              
              44,370TOTAL
                  EXPENSES
              
              
              37,756,045
              
              
              15,628,250
              
              
              3,805,388LOSS
                  BEFORE OTHER INCOME (EXPENSE) AND INCOME TAXES
              
              
              (37,342,348
              )
              
              (15,819,451
              )
              
              (1,294,321
              )OTHER
                  INCOME (EXPENSE)Net
                  gains on settlement of liabilities
              
              
              —
              
              
              268,397
              
              
              26,274Loss
                  on disposition of property and equipment
              
              
              —
              
              
              (56,804
              )
              
              (42,301
              )Loss
                  on settlement
              
              
              (1,256,873
              )
              
              —
              
              
              —Loss
                  on disposition of unconsolidated foreign subsidiary - CGI
              
              
              (352,300
              )
              
              —
              
              
              —Loss
                  on equipment deposit
              
              
              —
              
              
              (149,558
              )
              
              —Loss
                  on discontinued operations
              
              
              —
              
              
              —
              
              
              55,842Loss
                  on write-off of receivables and non-readily marketable
                  securities
              
              
              —
              
              
              —
              
              
              (4,834,878
              )Interest
                  income
              
              
              44,368
              
              
              2,067
              
              
              —Interest
                  expense
              
              
              (175,792
              )
              
              (189,520
              )
              
              (113,142
              )NET
                  OTHER EXPENSE
              
              
              (1,740,597
              )
              
              (125,418
              )
              
              (4,908,205
              )LOSS
                  BEFORE INCOME TAXES
              
              
              (39,082,945
              )
              
              (15,944,869
              )
              
              (6,202,526
              )INCOME
                  TAXESProvision
                  for income taxes
              
              
              —
              
              
              —
              
              
              —Tax
                  benefit from utilization of net operating loss
                  carryforward
              
              
              —
              
              
              —
              
              
              —TOTAL
                  INCOME TAXES
              
              
              —
              
              
              —
              
              
              —NET
                  LOSS
              
              
              ($39,082,945
              )
              
              ($15,944,869
              )
              
              ($
                  6,202,526
              )WEIGHTED
                  AVERAGE NUMBER OF COMMON SHARES OUTSTANDINGBASIC
              
              
              75,072,487
              
              
              49,892,551
              
              
              41,854,325DILUTED
              
              
              75,072,487
              
              
              49,892,551
              
              
              41,854,325NET
                  LOSS PER SHAREBASIC
              
              
              ($
                  0.52
              )
              
              ($
                  0.32
              )
              
              ($
                  0.15
              )DILUTED
              
              
              ($
                  0.52
              )
              
              ($
                  0.32
              )
              
              ($
                  0.15
              )




**See
      accompanying notes**




27


**GLOBETEL
      COMMUNICATIONS CORP. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**FOR
      THE YEARS ENDED DECEMBER 31,**


2005
              
              2004
              
              2003(restated)
              
              (restated)CASH
                  FLOWS FROM OPERATING ACTIVITIESNet
                  income (loss)
              
              
              ($39,082,945
              )
              
              ($15,944,869
              )
              
              ($
                  6,202,526
              )Adjustments
                  to reconcile net loss to net cash used by operating
                  activities:Depreciation
                  and amortization
              
              
              331,543
              
              
              170,021
              
              
              227,200Gain
                  on settlement of liabilities
              
              
              —
              
              
              (85,337
              )
              
              26,274Gain
                  on discontinued operations
              
              
              —
              
              
              —
              
              
              55,842Loss
                  on settlement
              
              
              1,256,873
              
              
              —
              
              
              —Loss
                  on disposition of unconsolidated foreign subsidiary - CGI
              
              
              352,300
              
              
              —
              
              
              —Loss
                  on disposition of fixed assets
              
              
              —
              
              
              56,804
              
              
              42,301Loss
                  on write-off of receivables and non-readily marketable
                  securities
              
              
              —
              
              
              —
              
              
              4,834,878Bad
                  debt expense
              
              
              1,373,458
              
              
              1,141,534
              
              
              1,409,994Research
                  and development expense
              
              
              7,129,550
              
              
              2,778,000
              
              
              —Common
                  stock exchanged for services
              
              
              4,930,573
              
              
              1,558,707
              
              
              604,510Common
                  stock exchanged for severence pay
              
              
              177,397
              
              
              —
              
              
              —Options
                  exchanged for services
              
              
              10,499,842
              
              
              5,828,833
              
              
              —(Increase)
                  decrease in assets:Accounts
                  receivable
              
              
              (4,193
              )
              
              —
              
              
              —Restricted
                  cash
              
              
              (1,122,000
              )
              
              211,010
              
              
              (2,755,602
              )Loans
                  to employees
              
              
              (39,183
              )
              
              —
              
              
              —Prepaid
                  expenses
              
              
              (117,522
              )
              
              (66,912
              )
              
              —Prepaid
                  expenses - related party, ISG Jets, LLC
              
              
              (185,960
              )
              
              —
              
              
              —Inventory
              
              
              (3,549
              )
              
              (63,976
              )
              
              —Other
                  current assets
              
              
              —
              
              
              —
              
              
              —Deposits
                  on equipment purchases
              
              
              (1,610
              )
              
              (28,092
              )
              
              74,486Deposits
                  and prepaid expenses
              
              
              —
              
              
              71,000
              
              
              (71,000
              )Increase
                  (decrease) in liabilities:Accounts
                  payable
              
              
              451,141
              
              
              (309,867
              )
              
              1,111,960Accounts
                  payable, to be satified with non-readily marketable
                  securities
              
              
              —
              
              
              —
              
              
              (974,951
              )Due
                  to former employee with GTE stock
              
              
              237,600
              
              
              —Due
                  to related party - Carrier Services and company principal
              
              
              901,606
              
              
              —Accrued
                  officers' salaries and bonuses
              
              
              (100,951
              )
              
              198,333
              
              
              —Accrued
                  expenses and other liabilities
              
              
              452,200
              
              
              29,054
              
              
              426,460Deferred
                  revenues
              
              
              (46,319
              )
              
              14,791
              
              
              (46,106
              )Deferred
                  revenues - related party
              
              
              —
              
              
              (27,023
              )
              
              (152,822
              )NET
                  CASH USED BY OPERATING ACTIVITIES
              
              
              (12,610,149
              )
              
              (4,467,989
              )
              
              (1,389,102
              )CASH
                  FLOWS FROM INVESTING ACTIVITIESAcquisition
                  of property and equipment
              
              
              (2,021,559
              )
              
              (204,206
              )
              
              (305,101
              )Acquisition
                  of Hotzone assets
              
              
              (27,000
              )
              
              —
              
              
              —Advances
                  to related party - Sanswire European joint venture
              
              
              —
              
              
              —
              
              
              —Deposit
                  on equipment
              
              
              (36,000
              )
              
              (145,479
              )
              
              (302,300
              )Loans
                  to employees
              
              
              —
              
              
              (6,885
              )
              
              —NET
                  CASH USED BY INVESTING ACTIVITIES
              
              
              (2,084,559
              )
              
              (356,570
              )
              
              (607,401
              )CASH
                  FLOWS FROM FINANCING ACTIVITIESSale
                  of preferred stock - Series A
              
              
              —
              
              
              1,057,500
              
              
              717,140Sale
                  of preferred stock - Series B
              
              
              250,000
              
              
              2,850,000
              
              
              —Sale
                  of preferred stock - Series C
              
              
              250,000
              
              
              1,000,000
              
              
              —Sale
                  of preferred stock - Series D
              
              
              —
              
              
              250,000
              
              
              —Sale
                  of common stock
              
              
              6,903,931
              
              
              —
              
              
              500,000Sale
                  of common stock - exercises of options
              
              
              48,412
              
              
              —
              
              
              —Proceeds
                  from unconsolidated foreign subsidiary - CGI
              
              
              1,568,524
              
              
              —
              
              
              —Proceeds
                  from capital lease financing
              
              
              —
              
              
              9,554
              
              
              —Payments
                  on capital lease financing
              
              
              (4,718
              )
              
              (2,229
              )
              
              (29,674
              )Proceeds
                  from notes and loans payable
              
              
              6,368,026
              
              
              375,000
              
              
              784,259Payments
                  on notes and loans payable
              
              
              (2,846
              )
              
              (398,701
              )
              
              —Proceeds
                  from related party payables
              
              
              —
              
              
              60,000
              
              
              144,194Payments
                  on related party payables
              
              
              (60,000
              )
              
              —
              
              
              (96,053
              )NET
                  CASH PROVIDED BY FINANCING ACTIVITIES
              
              
              15,321,329
              
              
              5,201,124
              
              
              2,019,866NET
                  INCREASE IN CASH AND EQUIVALENTS
              
              
              626,621
              
              
              376,565
              
              
              23,363CASH
                  AND EQUIVALENTS - BEGINNING
              
              
              601,559
              
              
              224,994
              
              
              201,631CASH
                  AND EQUIVALENTS - ENDING
              
              $
              1,228,180
              
              $
              601,559
              
              $
              224,994




28




**GLOBETEL
      COMMUNICATIONS CORP. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**FOR
      THE YEARS ENDED DECEMBER 31,**


SUPPLEMENTAL
                  DISCLOSURES
              
              2005
              
              2004
              
              2003(restated)
              
              (restated)Cash
                  paid during the period for:Interest
              
              $
              730
              
              $
              11,071
              
              $
              95,736Income
                  taxes
              
              $
              —
              
              $
              —
              
              $
              —In
                  addition to amounts reflected above, common stock was issued
                  for:Options
                  issued for services
              
              $
              10,499,842
              
              $
              5,828,833
              
              $
              10,000Options
                  issued for settlement of obligations
              
              $
              1,256,873
              
              $
              —
              
              $
              2,447,732Shares
                  issued for services
              
              $
              4,930,573
              
              $
              1,546,568
              
              $
              —Shares
                  issued for broker's fees (66,667 shares, recorded at par)
              
              $
              —
              
              $
              —
              
              $
              —Shares
                  issued for research and development
              
              $
              7,073,640
              
              $
              2,778,000
              
              $
              —Shares
                  issued for assets
              
              $
              55,910
              
              $
              32,000
              
              $
              —Conversion
                  of Series A preferred stock to common stock
              
              $
              697,500
              
              $
              1,452,140
              
              $
              —Conversion
                  of Series B preferred stock to common stock
              
              $
              8,435,200
              
              $
              —
              
              $
              —Conversion
                  of Series C preferred stock to common stock
              
              $
              750,000
              
              $
              250,000
              
              $
              —Conversion
                  of notes payable to common stock
              
              $
              6,368,026
              
              $
              —
              
              $
              —In
                  addition to amounts reflected above, preferred stock was issued
                  for:Series
                  A preferred stock issued for broker's fees (7,167 shares,Series
                  A preferred stock issued for broker's fees (7,167 shares, recorded
                  at
                  par)
              
              $
              —
              
              $
              —
              
              $
              —Series
                  B preferred stock issued for broker's fees
              
              $
              —
              
              $
              150,000
              
              $
              —Series
                  B preferred stock issued for settlement of debt
              
              $
              —
              
              $
              500,000
              
              $
              —Series
                  B preferred stock issued for equipment
              
              $
              4,835,200
              
              $
              —
              
              $
              —NON-CASH
                  FINANCING ACTIVITIES:On
                  July 28, 2004, $1,000,000 of Series D preferred stock was issued.
                  A stock
                  subscription receivable of $500,00 was outstanding as of December
                  31,
                  2005




See
      accompanying notes.




29




**GLOBETEL
        COMMUNICATIONS CORP. & SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENTS OF STOCKHOLDERS' EQUITY**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2005(restated), 2004(restated), AND
        2003**




COMMON
                  STOCKADDITIONAL
              
              STOCKPAID-IN
              
              SUBSCRIPTIONSDescription
              
              SHARES
              
              AMOUNT
              
              CAPITAL
              
              RECEIVABLEBalance,
                  Dec. 31, 2002
              
              
              40,354,686
              
              
              404
              
              
              24,450,106
              
              
              —Shares
                  issued for services
              
              
              1,583,236
              
              
              16
              
              
              568,494
              
              
              —Options
                  issued for services
              
              
              —
              
              
              —
              
              
              10,000
              
              
              —Shares
                  issued for severance pay
              
              
              80,000
              
              
              1
              
              
              35,999
              
              
              —Shares
                  issued for extinguishment of debt
              
              
              2,986,133
              
              
              29
              
              
              1,431,055
              
              
              —Options
                  issued for extinguishment of debt
              
              
              —
              
              
              —
              
              
              1,016,468
              
              
              —Shares
                  issued for cash
              
              
              1,338,688
              
              
              13
              
              
              499,987
              
              
              —Shares
                  issued for loan collateral
              
              
              333,333
              
              
              3
              
              
              (3
              )
              
              —Shares
                  returned for loan collateral
              
              
              (3,127,778
              )
              
              (31
              )
              
              31
              
              
              —Preferred
                  Series A shares issued for cash and stock subscriptions
                  receivable
              
              
              —
              
              
              —
              
              
              —
              
              
              —Net
                  loss
              
              
              —
              
              
              —
              
              
              —
              
              
              —Balance,
                  Dec. 31, 2003
              
              
              43,548,298
              
              
              435
              
              
              28,012,137
              
              
              —Shares
                  issued for options exercised
              
              
              3,963,186
              
              
              39
              
              
              (39
              )
              
              —Shares
                  issued to / for unconsolidated foreign subsidiary
              
              
              1,333,333
              
              
              13
              
              
              (13
              )
              
              —Shares
                  issued for services
              
              
              1,750,977
              
              
              18
              
              
              1,546,550
              
              
              —Shares
                  issued for Sanswire assets
              
              
              21,333
              
              
              1
              
              
              31,999
              
              
              —Shares
                  issued for research and development
              
              
              1,845,333
              
              
              19
              
              
              2,767,981
              
              
              —Shares
                  issued for Stratodyne assets
              
              
              133,333
              
              
              1
              
              
              (1
              )
              
              —Preferred
                  Series A shares issued for cash and stock subscriptions
                  receivable
              
              
              —
              
              
              —
              
              
              —
              
              
              —Preferred
                  Series A shares issued for broker's fees
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for conversion of Preferred
              
              
              —Series
                  A shares
              
              
              10,642,667
              
              
              107
              
              
              1,452,033
              
              
              —Preferred
                  Series B shares issued for cash and stock subscriptions
                  receivable
              
              
              —
              
              
              —
              
              
              —
              
              
              —Preferred
                  Series B shares issued for extinguishment of debt
              
              
              —
              
              
              —
              
              
              —
              
              
              —Preferred
                  Series B shares issued for broker's fees
              
              
              —
              
              
              —
              
              
              —
              
              
              —Preferred
                  Series C shares issued for cash and stock subscriptions
                  receivable
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for conversions of Preferred Series C shares
              
              
              151,515
              
              
              2
              
              
              249,998
              
              
              —Preferred
                  Series D shares issued for cash
              
              
              —
              
              
              —
              
              
              —
              
              
              —Options
                  issued for Board member stipends
              
              
              —
              
              
              —
              
              
              145,313
              
              
              —Options
                  issued for services, per 2004Stock
                  Option Plan
              
              
              —
              
              
              —
              
              
              1,191,937
              
              
              —Options
                  issued for services, per Executives % Stock Option Grant
                  Plan
              
              
              —
              
              
              —
              
              
              4,491,583
              
              
              —Net
                  loss
              
              
              —
              
              
              —
              
              
              —
              
              
              —Balance,
                  Dec. 31, 2004 (restated)
              
              
              63,389,976
              
              
              634
              
              
              39,889,479
              
              
              —Shares
                  issued for options exercised
              
              
              1,785,490
              
              
              18
              
              
              92,888
              
              
              (44,494
              )Shares
                  issued for services
              
              
              2,232,215
              
              
              22
              
              
              4,930,729
              
              
              —Shares
                  issued for convertible note payable and accrued interest
              
              
              4,269,876
              
              
              43
              
              
              6,367,983
              
              
              —Shares
                  issued for cash
              
              
              3,177,916
              
              
              32
              
              
              6,903,901
              
              
              —Shares
                  issued for brokers fees
              
              
              66,667
              
              
              1
              
              
              (1
              )
              
              —Shares
                  issued for severance pay
              
              
              106,977
              
              
              1
              
              
              177,396
              
              
              —Conversion
                  of amount due to unconsolidated subsidiary to equity per buy-back
                  agreement
              
              
              —
              
              
              —
              
              
              1,568,524
              
              
              —Shares
                  issued for conversion of Preferred Series A shares
              
              
              8,911,651
              
              
              89
              
              
              697,411
              
              
              —Preferred
                  Series B stock subscriptions receivable paid for with cash and
                  equipment
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for conversion of Preferred Series B shares
              
              
              12,931,334
              
              
              129
              
              
              8,435,070
              
              
              —Shares
                  issued for conversion of Preferred Series C shares
              
              
              1,320,000
              
              
              13
              
              
              749,987
              
              
              —Preferred
                  Series D stock subscriptions receivable paid for with cash
              
              
              —
              
              
              —
              
              
              —
              
              
              —Options
                  issued for Board member stipends
              
              
              —
              
              
              —
              
              
              85,575
              
              
              —Options
                  issued for executive compensation
              
              
              —
              
              
              —
              
              
              55,000
              
              
              —Options
                  issued for services, per Executives % Stock Option Grant
                  Plan
              
              
              —
              
              
              —
              
              
              10,359,267
              
              
              —Options
                  issued for settlement of obligations
              
              
              —
              
              
              —
              
              
              1,256,873
              
              
              —Net
                  loss
              
              
              —
              
              
              —
              
              
              —
              
              
              —BALANCE,
                  DEC. 31, 2005 (restated)
              
              
              98,192,102
              
              
              982
              
              
              81,570,082
              
              
              (44,494
              )




30




SERIES
                  AADDITIONAL
              
              STOCKPAID-IN
              
              SUBSCRIPTIONSDescription
              
              SHARES
              
              AMOUNT
              
              CAPITAL
              
              RECEIVABLEBalance,
                  Dec. 31, 2002
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for services
              
              
              —
              
              
              —
              
              
              —
              
              
              —Options
                  issued for services
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for severance pay
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for extinguishment of debt
              
              
              —
              
              
              —
              
              
              —
              
              
              —Options
                  issued for extinguishment of debt
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for cash
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for loan collateral
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  returned for loan collateral
              
              
              —
              
              
              —
              
              
              —
              
              
              —Preferred
                  Series A shares issued for cash and stock subscriptions
                  receivable
              
              
              72,000
              
              
              72
              
              
              1,092,068
              
              
              (375,000
              )Net
                  loss
              
              
              —
              
              
              —
              
              
              —
              
              
              —Balance,
                  Dec. 31, 2003
              
              
              72,000
              
              
              72
              
              
              1,092,068
              
              
              (375,000
              )Shares
                  issued for options exercised
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued to / for unconsolidated foreign subsidiary
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for services
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for Sanswire assets
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for research and development
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for Stratodyne assets
              
              
              —
              
              
              —
              
              
              —
              
              
              —Preferred
                  Series A shares issued for cash and stock subscriptions
                  receivable
              
              
              70,500
              
              
              71
              
              
              1,057,429
              
              
              375,000Preferred
                  Series A shares issued for broker's fees
              
              
              107,500
              
              
              107
              
              
              (107
              )
              
              —Shares
                  issued for conversion of Preferred Series A shares
              
              
              (153,500
              )
              
              (153
              )
              
              (1,451,987
              )
              
              —Preferred
                  Series B shares issued for cash and stock subscriptions
                  receivable
              
              
              —
              
              
              —
              
              
              —
              
              
              —Preferred
                  Series B shares issued for extinguishment of debt
              
              
              —
              
              
              —
              
              
              —
              
              
              —Preferred
                  Series B shares issued for broker's fees
              
              
              —
              
              
              —
              
              
              —
              
              
              —Preferred
                  Series C shares issued for cash and stock subscriptions
                  receivable
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for conversions of Preferred Series C shares
              
              
              —
              
              
              —
              
              
              —
              
              
              —Preferred
                  Series D shares issued for cash
              
              
              —
              
              
              —
              
              
              —
              
              
              —Options
                  issued for Board member stipends
              
              
              —
              
              
              —
              
              
              —
              
              
              —Options
                  issued for services, per 2004 Stock Option Plan
              
              
              —
              
              
              —
              
              
              —
              
              
              —Options
                  issued for services, per Executives % Stock Option Grant
                  Plan
              
              
              —
              
              
              —
              
              
              —
              
              
              —Net
                  loss
              
              
              —
              
              
              —
              
              
              —
              
              
              —Balance,
                  Dec. 31, 2004 (restated)
              
              
              96,500
              
              
              97
              
              
              697,403
              
              
              —Shares
                  issued for options exercised
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for services
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for convertible note payable and accrued interest
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for cash
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for brokers fees
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for severance pay
              
              
              —
              
              
              —
              
              
              —
              
              
              —Conversion
                  of amount due to unconsolidated subsidiary to equity per buy-back
                  agreement
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for conversion of Preferred Series A shares
              
              
              (96,500
              )
              
              (97
              )
              
              (697,403
              )
              
              —Preferred
                  Series B stock subscriptions receivable paid for with cash and
                  equipment
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for conversion of Preferred Series B shares
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for conversion of Preferred Series C shares
              
              
              —
              
              
              —
              
              
              —
              
              
              —Preferred
                  Series D stock subscriptions receivable paid for with cash
              
              
              —
              
              
              —
              
              
              —
              
              
              —Options
                  issued for Board member stipends
              
              
              —
              
              
              —
              
              
              —
              
              
              —Options
                  issued for executive compensation
              
              
              —
              
              
              —
              
              
              —
              
              
              —Options
                  issued for services, per Executives % Stock Option Grant
                  Plan
              
              
              —
              
              
              —
              
              
              —
              
              
              —Options
                  issued for settlement of obligations
              
              
              —
              
              
              —
              
              
              —
              
              
              —Net
                  loss
              
              
              —
              
              
              —
              
              
              —
              
              
              —BALANCE,
                  DEC. 31, 2005 (restated)
              
              
              —
              
              
              —
              
              
              —
              
              
              —




31




SERIES
                  BADDITIONAL
              
              STOCKPAID-IN
              
              SUBSCRIPTIONSDescription
              
              SHARES
              
              AMOUNT
              
              CAPITAL
              
              RECEIVABLEBalance,
                  Dec. 31, 2002
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for services
              
              
              —
              
              
              —
              
              
              —
              
              
              —Options
                  issued for services
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for severance pay
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for extinguishment of debt
              
              
              —
              
              
              —
              
              
              —
              
              
              —Options
                  issued for extinguishment of debt
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for cash
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for loan collateral
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  returned for loan collateral
              
              
              —
              
              
              —
              
              
              —
              
              
              —Preferred
                  Series A shares issued for cash and stock subscriptions
                  receivable
              
              
              —
              
              
              —
              
              
              —
              
              
              —Net
                  loss
              
              
              —
              
              
              —
              
              
              —
              
              
              —Balance,
                  Dec. 31, 2003
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for options exercised
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued to / for unconsolidated foreign subsidiary
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for services
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for Sanswire assets
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for research and development
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for Stratodyne assets
              
              
              —
              
              
              —
              
              
              —
              
              
              —Preferred
                  Series A shares issued for cash and stock subscriptions
                  receivable
              
              
              —
              
              
              —
              
              
              —
              
              
              —Preferred
                  Series A shares issued for broker's fees
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for conversion of Preferred Series A shares
              
              
              —
              
              
              —
              
              
              —
              
              
              —Preferred
                  Series B shares issued for cash and stock subscriptions
                  receivable
              
              
              35,000
              
              
              35
              
              
              14,999,965
              
              
              (12,150,000
              )Preferred
                  Series B shares issued for extinguishment of debt
              
              
              —
              
              
              —
              
              
              —
              
              
              500,000Preferred
                  Series B shares issued for broker's fees
              
              
              —
              
              
              —
              
              
              (150,000
              )
              
              150,000Preferred
                  Series C shares issued for cash and stock subscriptions
                  receivable
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for conversions of Preferred Series C shares
              
              
              —
              
              
              —
              
              
              —
              
              
              —Preferred
                  Series D shares issued for cash
              
              
              —
              
              
              —
              
              
              —
              
              
              —Options
                  issued for Board member stipends
              
              
              —
              
              
              —
              
              
              —
              
              
              —Options
                  issued for services, per 2004 Stock Option Plan
              
              
              —
              
              
              —
              
              
              —
              
              
              —Options
                  issued for services, per Executives % Stock Option Grant
                  Plan
              
              
              —
              
              
              —
              
              
              —
              
              
              —Net
                  loss
              
              
              —
              
              
              —
              
              
              —
              
              
              —Balance,
                  Dec. 31, 2004 (restated)
              
              
              35,000
              
              
              35
              
              
              14,849,965
              
              
              (11,500,000
              )Shares
                  issued for options exercised
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for services
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for convertible note payable and accrued interest
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for cash
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for brokers fees
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for severance pay
              
              
              —
              
              
              —
              
              
              —
              
              
              —Conversion
                  of amount due to unconsolidated subsidiary to equity per buy-back
                  agreement
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for conversion of Preferred Series A shares
              
              
              —
              
              
              —
              
              
              —
              
              
              —Preferred
                  Series B stock subscriptions receivable paid for with cash and
                  equipment
              
              
              —
              
              
              —
              
              
              —
              
              
              5,085,200Shares
                  issued for conversion of Preferred Series B shares
              
              
              (35,000
              )
              
              (35
              )
              
              (14,849,965
              )
              
              6,414,800Shares
                  issued for conversion of Preferred Series C shares
              
              
              —
              
              
              —
              
              
              —
              
              
              —Preferred
                  Series D stock subscriptions receivable paid for with cash
              
              
              —
              
              
              —
              
              
              —
              
              
              —Options
                  issued for Board member stipends
              
              
              —
              
              
              —
              
              
              —
              
              
              —Options
                  issued for executive compensation
              
              
              —
              
              
              —
              
              
              —
              
              
              —Options
                  issued for services, per Executives % Stock Option Grant
                  Plan
              
              
              —
              
              
              —
              
              
              —
              
              
              —Options
                  issued for settlement of obligations
              
              
              —
              
              
              —
              
              
              —
              
              
              —Net
                  loss
              
              
              —
              
              
              —
              
              
              —
              
              
              —BALANCE,
                  DEC. 31, 2005 (restated)
              
              
              —
              
              
              —
              
              
              —
              
              
              —




32




SERIES
                  CADDITIONAL
              
              STOCKPAID-IN
              
              SUBSCRIPTIONSDescription
              
              SHARES
              
              AMOUNT
              
              CAPITAL
              
              RECEIVABLEBalance,
                  Dec. 31, 2002
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for services
              
              
              —
              
              
              —
              
              
              —
              
              
              —Options
                  issued for services
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for severance pay
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for extinguishment of debt
              
              
              —
              
              
              —
              
              
              —
              
              
              —Options
                  issued for extinguishment of debt
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for cash
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for loan collateral
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  returned for loan collateral
              
              
              —
              
              
              —
              
              
              —
              
              
              —Preferred
                  Series A shares issued for cash and stock subscriptions
                  receivable
              
              
              —
              
              
              —
              
              
              —
              
              
              —Net
                  loss
              
              
              —
              
              
              —
              
              
              —
              
              
              —Balance,
                  Dec. 31, 2003
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for options exercised
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued to / for unconsolidated foreign subsidiary
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for services
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for Sanswire assets
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for Stratodyne assets
              
              
              —
              
              
              —
              
              
              —
              
              
              —Preferred
                  Series A shares issued for cash and stock subscriptions
                  receivable
              
              
              —
              
              
              —
              
              
              —
              
              
              —Preferred
                  Series A shares issued for broker's fees
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for conversion of Preferred Series A shares
              
              
              —
              
              
              —
              
              
              —
              
              
              —Preferred
                  Series B shares issued for cash and stock subscriptions
                  receivable
              
              
              —
              
              
              —
              
              
              —
              
              
              —Preferred
                  Series B shares issued for extinguishment of debt
              
              
              —
              
              
              —
              
              
              —
              
              
              —Preferred
                  Series B shares issued for broker's fees
              
              
              —
              
              
              —
              
              
              —
              
              
              —Preferred
                  Series C shares issued for cash and stock subscriptions
                  receivable
              
              
              1,000
              
              
              1
              
              
              999,999
              
              
              —Shares
                  issued for conversions of Preferred Series C shares
              
              
              (250
              )
              
              —
              
              
              (250,000
              )
              
              —Preferred
                  Series D shares issued for cash
              
              
              —
              
              
              —
              
              
              —
              
              
              —Options
                  issued for Board member stipends
              
              
              —
              
              
              —
              
              
              —
              
              
              —Options
                  issued for services, per 2004 Stock Option Plan
              
              
              —
              
              
              —
              
              
              —
              
              
              —Options
                  issued for services, per Executives % Stock Option Grant
                  Plan
              
              
              —
              
              
              —
              
              
              —
              
              
              —Net
                  loss
              
              
              —
              
              
              —
              
              
              —
              
              
              —Balance,
                  Dec. 31, 2004 (restated)
              
              
              750
              
              
              1
              
              
              749,999
              
              
              —Shares
                  issued for options exercised
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for services
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for convertible note payable and accrued interest
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for cash
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for brokers fees
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for severance pay
              
              
              —
              
              
              —
              
              
              —
              
              
              —Conversion
                  of amount due to unconsolidated subsidiary to equity per buy-back
                  agreement
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for conversion of Preferred Series A shares
              
              
              —
              
              
              —
              
              
              —
              
              
              —Preferred
                  Series B stock subscriptions receivable paid for with cash and
                  equipment
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for conversion of Preferred Series B shares
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for conversion of Preferred Series C shares
              
              
              (750
              )
              
              (1
              )
              
              (749,999
              )
              
              —Preferred
                  Series D stock subscriptions receivable paid for with cash
              
              
              —
              
              
              —
              
              
              —
              
              
              —Options
                  issued for Board member stipends
              
              
              —
              
              
              —
              
              
              —
              
              
              —Options
                  issued for executive compensation
              
              
              —
              
              
              —
              
              
              —
              
              
              —Options
                  issued for services, per Executives % Stock Option Grant
                  Plan
              
              
              —
              
              
              —
              
              
              —
              
              
              —Options
                  issued for settlement of obligations
              
              
              —
              
              
              —
              
              
              —
              
              
              —Net
                  loss
              
              
              —
              
              
              —
              
              
              —
              
              
              —BALANCE,
                  DEC. 31, 2005 (restated)
              
              
              —
              
              
              —
              
              
              —
              
              
              —




33




SERIES
                  DADDITIONAL
              
              STOCK
              
              
              
              TOTALPAID-IN
              
              SUBSCRIPTIONS
              
              ACCUMULATED
              
              SHAREHOLDERS'Description
              
              SHARES
              
              AMOUNT
              
              CAPITAL
              
              RECEIVABLE
              
              DEFECIT
              
              EQUITYBalance,
                  Dec. 31, 2002
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              (20,291,641
              )
              
              4,158,869Shares
                  issued for services
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              568,510Options
                  issued for services
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              10,000Shares
                  issued for severance pay
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              36,000Shares
                  issued for extinguishment of debt
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              1,431,084Options
                  issued for extinguishment of debt
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              1,016,468Shares
                  issued for cash
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              500,000Shares
                  issued for loan collateral
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  returned for loan collateral
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —Preferred
                  Series A shares issued for cash and stock subscriptions
                  receivable
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              717,140Net
                  loss
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              (6,202,526
              )
              
              (6,202,526
              )Balance,
                  Dec. 31, 2003
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              (26,494,167
              )
              
              2,235,545Shares
                  issued for options exercised
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued to / for unconsolidated foreign subsidiary
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for services
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              1,546,568Shares
                  issued for Sanswire assets
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              32,000Shares
                  issued for research and development
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              2,768,000Shares
                  issued for Stratodyne assets
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —Preferred
                  Series A shares issued for cash and stock subscriptions
                  receivable
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              1,432,500Preferred
                  Series A shares issued for broker's fees
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for conversion of Preferred Series A shares
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —Preferred
                  Series B shares issued for cash and stock subscriptions
                  receivable
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              2,850,000Preferred
                  Series B shares issued for extinguishment of debt
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              500,000Preferred
                  Series B shares issued for broker's fees
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —Preferred
                  Series C shares issued for cash and stock subscriptions
                  receivable
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              1,000,000Shares
                  issued for conversions of Preferred Series C shares
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —Preferred
                  Series D shares issued for cash
              
              
              1,000
              
              
              1
              
              
              999,999
              
              
              (750,000
              )
              
              —
              
              
              250,000Options
                  issued for Board member stipends
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              145,313Options
                  issued for services, per 2004 Stock Option Plan
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              1,191,937Options
                  issued for services, per Executives % Stock Option Grant
                  Plan
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              4,491,583Net
                  loss
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              (15,944,869
              )
              
              (15,944,869
              )Balance,
                  Dec. 31, 2004 (restated)
              
              
              1,000
              
              
              1
              
              
              999,999
              
              
              (750,000
              )
              
              (42,439,036
              )
              
              2,498,577Shares
                  issued for options exercised
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              48,412Shares
                  issued for services
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              4,930,751Shares
                  issued for convertible note payable and accrued interest
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              6,368,026Shares
                  issued for cash
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              6,903,932Shares
                  issued for brokers fees
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for severance pay
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              177,397Conversion
                  of amount due to unconsolidated subsidiary to equity per buy-back
                  agreement
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              1,568,524Shares
                  issued for conversion of Preferred Series A shares
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —Preferred
                  Series B stock subscriptions receivable paid for with cash and
                  equipment
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              5,085,200Shares
                  issued for conversion of Preferred Series B shares
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —Shares
                  issued for conversion of Preferred Series C shares
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —Preferred
                  Series D stock subscriptions receivable paid for with cash
              
              
              —
              
              
              —
              
              
              —
              
              
              250,000
              
              
              —
              
              
              250,000Options
                  issued for Board member stipends
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              85,575Options
                  issued for executive compensation
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              55,000Options
                  issued for services, per Executives % Stock Option Grant
                  Plan
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              10,359,267Options
                  issued for settlement of obligations
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              1,256,873Net
                  loss
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              (39,082,945
              )
              
              (39,082,944
              )BALANCE,
                  DEC. 31, 2005 (restated)
              
              
              1,000
              
              
              1
              
              
              999,999
              
              
              (500,000
              )
              
              (81,521,980
              )
              
              504,589




34







**GLOBETEL
      COMMUNICATIONS CORP. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED)**





**NOTE
      1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES**





NATURE
      OF
      OPERATIONS





GlobeTel
      Communications Corp. ("Globetel") is engaged in the business of providing
      telecommunications and financial services. GlobeTel operates business unites
      in
      stored value cards, as a certified MasterCard processor, the sale of Internet
      telephony using Voice over Internet Protocol ("VoIP") technology and equipment,
      and wireless communications both domestically and internationally, including
      Mexico and certain countries in South America, Europe and Asia. In addition,
      our
      subsidiary, Sanswire Networks, LLC, is developing a National Wireless Broadband
      Network utilizing high-altitude airships called Stratellites that will be used
      to provide wireless voice, video, and data services. Although through December
      31, 2005, only the telecommunications activities produced revenues, all of
      our
      operations are considered to be of relatively equal importance, based on the
      anticipation of future revenue producing activities and substantial investment
      in assets related to all of our operations.





ORGANIZATION
      AND CAPITALIZATION





GlobeTel
      was organized in July 2002, under the laws of the State of Delaware. Upon its
      incorporation, GlobeTel was a wholly-owned subsidiary of American Diversified
      Group, Inc. (ADGI). ADGI was organized January 16, 1979, under the laws of
      the
      State of Nevada. ADGI had two other wholly-owned subsidiaries, Global Transmedia
      Communications Corporation (Global), a Delaware corporation, and NCI Telecom,
      Inc. (NCI), a Missouri corporation.





On
      July
      1, 2002, both Global and NCI were merged into ADGI. On July 24, 2002, ADGI
      stockholders approved a plan of reincorporation for the exchange of all
      outstanding shares of ADGI for an equal number of shares of GlobeTel.
      Subsequently, ADGI was merged into GlobeTel, which is now conducting the
      business formerly conducted by ADGI and its subsidiaries, and all references
      to
      ADGI in these financial statements now apply to GlobeTel interchangeably.





In
      July
      2002, pursuant to the reincorporation, the Company authorized the issuance
      of up
      to 1,500,000,000 (pre-split) shares of common stock, par value of $0.00001
      per
      share and up to 10,000,000 shares of preferred stock, par value of $0.001 per
      share.





In
      May
      2005, GlobeTel approved a reverse split of shares of common stock on a one
      for
      fifteen (1:15) basis and changed the number of shares authorized to 100,000,000.
      In the Company's annual shareholders meeting on August 1, 2005, the shareholders
      voted to increase the shares authorized from 100,000,000 to
      150,000,000.





All
      common stock amounts in this report have been retroactively restated to account
      for the reverse stock split, unless otherwise noted.





BASIS
      OF
      PRESENTATION





The
      financial statements include the accounts of GlobeTel Communications Corp.
      and
      its wholly-owned subsidiaries: Sanswire Networks, LLC; GlobeTel Wireless Corp.;
      GlobeTel Wireless Europe GmbH, a German corporation, and Centerline
      Communications, LLC, and its wholly-owned subsidiaries, EQ8, LLC, EnRoute
      Telecom, LLC, G Link Solutions, LLC, Volta Communications, LLC, and Lonestar
      Communications, LLC; High Valley Property Ltd., a British Virgin Islands
      corporation; as well as the accounts GTCC de Mexico, S.A. de C.V, which GlobeTel
      owns 99% of.





All
      material inter-company balances and transactions were eliminated in the
      consolidation.





RECENTLY
      ISSUED ACCOUNTING PRONOUNCEMENTS





In
      December 2003, the Financial Accounting Standards Board (FASB) issued a revised
      Interpretation No. 46, "Consolidation of Variable Interest Entities" (FIN 46R).
      FIN 46R addresses consolidation by business enterprises of variable interest
      entities and significantly changes the consolidation application of
      consolidation policies to variable interest entities and, thus improves
      comparability between enterprises engaged in similar activities when those
      activities are conducted through variable interest entities. The Company does
      not hold any variable interest entities as of December 31, 2005. The Company
      expects the adoption of this standard will have a material impact on its
      financial statements assuming variable interest entities are applicable in
      the
      future.




35





In
      November 2004, the FASB issued Statement No. 151, "Inventory Costs", to amend
      the guidance in Chapter 4, “Inventory Pricing", of FASB Accounting Research
      Bulletin (ARB) No. 43, "Restatement and Revision of Accounting Research
      Bulletins", which will become effective for the Company in fiscal year 2006.
      Statement 151 clarifies the accounting for abnormal amounts of idle facility
      expense, freight, handling costs, and wasted material (spoilage). The Statement
      requires that those items be recognized as current-period charges. Additionally,
      Statement 151 requires that allocation of fixed production overhead to the
      costs
      of conversion be based on the normal capacity of the production facilities.
      Management believes that the adoption of SFAS 151 will not affect the Company's
      financial position or results of operations.





In
      December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets,"
      an amendment to Opinion No. 29, "Accounting for Nonmonetary Transactions."
      Statement No. 153 eliminates certain differences in the guidance in Opinion
      No.
      29 as compared to the guidance contained in standards issued by the
      International Accounting Standards Board. The amendment to Opinion No. 29
      eliminates the fair value exception for nonmonetary exchanges of similar
      productive assets and replaces it with a general exception for exchanges of
      nonmonetary assets that do not have commercial substance. Such an exchange
      has
      commercial substance if the future cash flows of the entity are expected to
      change significantly as a result of the exchange. SFAS No. 153 is effective
      for
      nonmonetary asset exchanges occurring in periods beginning after June 15, 2005.
      Earlier application is permitted for nonmonetary asset exchanges occurring
      in
      periods beginning after December 16, 2005. Management does not expect adoption
      of SFAS No. 153 to have any impact on the Company's financial
      statements.





In
      December 2004, the FASB issued SFAS No. 123 (revised 2005) “Share-Based
      Payments", which is a revision of SFAS No. 123, “Accounting for Stock-Based
      Compensation". SFAS No. 123(R) supersedes APB Opinion No. 25, Accounting for
      Stock Issued to Employees and amends SFAS No. 95, “Statement of Cash Flows".
      Generally, the approach in SFAS No. 123(R) is similar to the approach described
      in SFAS No. 123. However, SFAS No. 123(R) requires all share-based payments
      to
      employees, including grants of employee stock options, to be recognized in
      the
      income statement based on their fair values. Pro forma disclosure is no longer
      an alternative. The new standard will be effective for the Company in the first
      interim or annual reporting period beginning after December 15, 2005. The
      Company expects the adoption of this standard will have a material impact on
      its
      financial statements assuming employee stock options are granted in the
      future.





The
      adoptions of these new pronouncements have not and, other than as noted above,
      are not expected to have a material effect on the Company’s consolidated
      financial position or results of operations.





MOVE
      TO
      AMERICAN STOCK EXCHANGE





On
      May 6,
      2005, the Board of Directors approved a reverse split of the Company's shares
      of
      common stock on a one for fifteen (1:15) basis, in anticipation of the Company's
      move to the American Stock Exchange (AMEX) on May 23, 2005. The AMEX granted
      approval for the Company to list is shares on the exchange and the Company
      began
      trading on the AMEX under the symbol GTE on May 23, 2005. On October 3, 2006
      the
      Company was notified that the Amex would delist the stock from the Exchange.
      All
      common stock amounts in this report have been restated to account for the
      reverse stock split, unless otherwise noted.





RECLASSIFICATIONS





Certain
      amounts in the prior year financial statements have been reclassified for
      comparative purposes to conform to the current year presentation. There were
      no
      material changes in classifications made to previously issued financial
      statements.





CASH
      AND
      CASH EQUIVALENTS AND RESTRICTED CASH





The
      Company considers all highly liquid debt instruments with an original maturity
      of three months or less at the date of purchase to be cash equivalents.
      Restricted cash represents letters of credit to suppliers for MasterCard in
      the
      amount of $1,000,000 in support of the Stored Value Card program, rental deposit
      for Los Angeles World Airport related to the Palmdale Hanger occupied by
      Sanswire Networks, LLC in the amount of $72,000 and for a wholesale carrier
      in
      the amount of $50,000.





The
      Company anticipates increased cash flows from 2006 sales activities; however,
      additional cash will still be needed to support operations. Management believes
      it can continue to raise capital from various funding sources, which when added
      to budgeted sales and current working capital, will be sufficient to sustain
      operations at its current level through January 1, 2007. However, if budgeted
      sales levels are not achieved and/or if significant unanticipated expenditures
      occur, or if we are unable to obtain the necessary funding, the company may
      have
      to modify its business plan, reduce or discontinue some of its operations or
      seek a buyer for all or part of its assets to continue as a going concern
      through 2006.




36





ACCOUNTS
      RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS





Trade
      and
      other accounts receivable are reported at face value less any provisions for
      uncollectible accounts considered necessary. Accounts receivable primarily
      includes trade receivables from customers and, in connections with our Mexico
      network, Mexican tax refunds receivable. The Company estimates doubtful accounts
      on an item-to-item basis and includes over-aged accounts as part of allowance
      for doubtful accounts, which are generally accounts that are ninety-days or
      more
      overdue. When accounts are deemed uncollectible, the account receivable is
      charged off and the allowance account is reduced accordingly. Bad debt expense
      for the years ended December 31, 2005, 2004 and 2003 were $1,373,458,
      $1,141,534, and $1,409,994, respectively.





INVENTORY





Inventory
      is recorded at lower-of-cost-or-market, first-in first-out (FIFO) basis.
      Inventory at December 31, 2005 consisted primarily of communications equipment
      and component parts related to our wireless operations. Inventory at December
      31, 2004 consisted of IP (Internet Protocol) phones held for
      resale.





As
      of
      December 31, 2005, the Company wrote-off $60,976 of IP phones inventory
      considered obsolete and charged this amount against costs of sales.





PROPERTY
      AND EQUIPMENT





Property
      and equipment consists of primarily telecommunications equipment, computer
      and
      related equipment and office furniture and fixtures, which are stated at cost
      less depreciation and amortization. Depreciation is based on the estimated
      useful lives of the assets, ranging from seven years for office furniture and
      equipment to five years for telecommunications equipment, using the
      straight-line method. Expenditures for maintenance and repairs are charged
      to
      expense as incurred. Major improvements are capitalized. Gains and losses on
      disposition of property and equipment are included in income as realized.





REVENUE
      RECOGNITION





Revenues
      for voice, data, and other services to end-users are recognized in the month
      in
      which the service is provided. Amounts invoiced and collected in advance of
      services provided are recorded as deferred revenue. Revenues for carrier
      interconnection and access are recognized in the month in which the service
      is
      provided.





Sales
      of
      telecommunications networks are recognized when the networks are delivered
      and
      accepted by the customer. Sales of computer hardware, equipment, and
      installation are recognized when products are shipped to customers. Provisions
      for estimated returns and allowances are provided for in the same period the
      related sales are recorded. Revenues on service contracts are recognized ratably
      over applicable contract periods. Amounts billed and collected before services
      are performed are included in deferred revenues.





INCOME
      TAXES





Income
      taxes are computed under the provisions of the Financial Accounting Standards
      Board (FASB) Statement No. 109 (SFAS 109), Accounting for Income Taxes. SFAS
      109
      is an asset and liability approach that requires the recognition of deferred
      tax
      assets and liabilities for the expected future tax consequences of the
      difference in events that have been recognized in the Company's financial
      statements compared to the tax returns.





ADVERTISING
      AND MARKETING COSTS





Advertising
      and marketing costs are charged to operations in the period incurred.
      Advertising and marketing expense for the years ended December 31, 2005, 2004
      and 2003, were $265,283, $19,160 and $105,314, respectively, and are included
      in
      "Investor and public relations" in the consolidated statements of income
      (loss).





FAIR
      VALUE OF FINANCIAL INSTRUMENTS





Financial
      instruments, including cash, receivables, securities, accounts payable, and
      notes payable are carried at amounts which reasonably approximate their fair
      value due to the short-term nature of these amounts or due to variable rates
      of
      interest which are consistent with market rates.





CONCENTRATIONS
      OF CREDIT RISK AND ECONOMIC DEPENDENCE





Financial
      instruments, which potentially subject the Company to a concentration of credit
      risk, are cash and cash equivalents and accounts receivable. The Company
      currently maintains a substantial portion of its day-to-day operating cash
      balances at a single financial institution. The Company had cash balances of
      $1,098,802, $562,760 (restated from Book to Bank) and $224,994 as of December
      31, 2005, 2004 and 2003, respectively, which are in excess of federally insured
      limit. As of December 31, 2005, 2004 and 2003, the Company had $898,701,
      $462,760 and $124,994, respectively, in excess of federally insured
      limits.




37





The
      Company operates worldwide. Consequently, the Company's ability to collect
      the
      amounts due from customers may be affected by economic fluctuations in each
      of
      the geographical locations in which the Company provides its services,
      principally Central and South America and Asia. The Company is dependent upon
      certain major customers, key suppliers, and contractual agreements, the absence
      of which may affect the Company's ability to operate its telecommunications
      business at current levels.





The
      company anticipates increased cash flows from 2006 sales activities; however,
      additional cash will still be needed to support operations. Management believes
      it can raise capital from various funding sources, which when added to budgeted
      sales and current working capital, will be sufficient to sustain operations
      at
      its current level through January 1, 2007. However, if budgeted sales levels
      are
      not achieved and / or if significant unanticipated expenditures occur, or if
      we
      are unable to obtain the necessary funding, the company may have to modify
      its
      business plan, reduce or discontinue some of its operations or seek a buyer
      for
      all or part of its assets to continue as a going concern through
      2006.





USE
      OF
      ESTIMATES





The
      process of preparing financial statements in conformity with generally accepted
      accounting principles in the United States requires the use of estimates and
      assumptions regarding certain types of assets, liabilities, revenues, and
      expenses. Such estimates primarily relate to unsettled transactions and events
      as of the date of the financial statements. Accordingly, upon settlement, actual
      results may differ from estimated amounts.





NET
      LOSS
      PER COMMON SHARE





Basic
      net
      loss per common share has been computed based upon the weighted average number
      of shares of common stock outstanding during each period. The basic net loss
      is
      computed by dividing the net loss by the weighted average number of common
      shares outstanding during each period. In periods where losses are reported,
      the
      weighted average number of common shares outstanding excludes common stock
      equivalents because their inclusion would be anti-dilutive. Following is a
      reconciliation of the numerators and denominators of the basic and diluted
      earnings per share computations for the year ended December 31,
      2005:





Income
              (Numerator)
            
            Shares
              (Denominator)
            
            Per-Share
              AmountBasic
                Net Loss per Share:Income
                (loss) available tocommon
                stockholders
            
            $
            (39,082,945
            )
            
            74,072,487
            
            $
            (.52
            )Effect
                of Dilutive ConvertiblePreferred
                Stock and Options
            
            
            —
            
            
            —
            
            
            —Diluted
                Net Income (loss) per Share:Income
                (loss) available to commonstockholders
                plus, assumedConversions
                and exercises
            
            $
            (39,082,945
            )
            
            74,072,487
            
            $
            (.52
            )





Available
      stock options at December 31, 2005, 2004 and 2003, were anti-dilutive and
      therefore were excluded from the net income (loss) per common share calculation.
      If all outstanding options, warrants and convertible shares were to be converted
      or exercised as of the date of this report, the weighted average fully diluted
      shares outstanding would be 95,841,094.





IMPAIRMENT
      OF LONG-LIVED ASSETS





The
      Company follows FASB Statement No. 144 (SFAS 144), "Accounting for the
      Impairment of Long-Lived Assets." SFAS 144 requires that long-lived assets
      to be
      held and used are reviewed for impairment whenever events or changes in
      circumstances indicate that the related carrying amount may not be recoverable.
      When required, impairment losses on assets to be held and used are recognized
      based on the fair value of the asset. Long-lived assets to be disposed of,
      if
      any, are reported at the lower of carrying amount or fair value less cost to
      sell.




38





STOCK-BASED
      COMPENSATION





The
      Company accounts for its stock-based compensation arrangements with employees
      in
      accordance with Accounting Principles Board Opinion No. 25, "Accounting for
      Stock Issued to Employees" ("APB 25") and related interpretations. As such,
      compensation expense under fixed term option plans is recorded at the date
      of
      grant only to the extent that the market value of the underlying stock at the
      date of grant exceeds the exercise price. In accordance with SFAS No. 123
      "Accounting for Stock-Based Compensation" ("SFAS 123"), since the Company has
      continued to apply the principles of APB 25 to employee stock compensation,
      pro
      forma loss and pro forma loss per share information has been presented as if
      the
      options had been valued at their fair values. The Company recognizes
      compensation expense for stock options, common stock and other equity
      instruments issued to non-employees for services received based upon the fair
      value of the services or equity instruments issued, whichever is more reliably
      determined. Stock compensation expense is recognized as the stock option is
      earned, which is generally over the vesting period of the underlying
      option.





In
      December 2002, the FASB issued SFAS No. 148 "Accounting for Stock-Based
      Compensation". This statement amends SFAS 123. SFAS 148 provides alternative
      methods of transition for companies that voluntarily change to the fair
      value-based 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 compensation and the effect
      of
      the method used on reported results.





In
      March
      2000, the FASB issued FASB Interpretation No. 44, "Accounting for Certain
      Transactions Involving Stock Compensation." ("FIN 44") The Company adopted
      FIN
      44, effective July 1, 2000, with respect to certain provisions applicable to
      new
      awards, option repricings, and changes in grantee status. FIN 44 addresses
      practice issues related to the application of APB 25. The Company accounts
      for
      stock-based compensation issued to non-employees and consultants in accordance
      with the provisions of SFAS 123 and SFAS 148 and EITF No. 96-18, "Accounting
      for
      Equity Instruments that are issued to Other Than Employees for Acquiring or
      in
      Conjunction with Selling, Goods or Services". The measurement date used is
      the
      earlier of either the performance commitment date or the date at which the
      equity instrument holder's performance is complete.





Had
      compensation cost for the Company's stock option plans been determined based
      on
      the fair value at the grant date for awards under those plans, consistent with
      the measurement provisions of SFAS 123 and SFAS 148, the Company's net loss
      and
      basic loss per share would have been adjusted as follows:





2005
            
            2004Net
                loss for the year - as reported
            
            $
            (39,082,945
            )
            $
            (15,944,869
            )Add:
                Total stock-based compensation expense included in Net loss, as reported
                determined under APB 25, net of related tax effects
            
            
            10,499,842
            
            
            5,828,833Deduct:
                Total stock-based compensation expense determined under fair value
                based
                method for all awards, net of related tax effects
            
            
            (14,429,334
            )
            
            (5,323,319
            )Net
                loss for the year - pro forma
            
            $
            (43,012,437
            )
            $
            (15,439,355
            )




The
      fair
      value of each option grant has been estimated on the date of the grant using
      the
      Black-Scholes option-pricing model with the following assumptions:





2005
            
            2004
            
            2003Expected
                dividend yield
            
            
            —
            
            
            —
            
            
            —Expected
                stock price volatility
            
            
            50
            %
            
            300
            %
            
            150
            %Risk-free
                interest rate
            
            
            5.0
            %
            
            2.0
            %
            
            2.0
            %Expected
                life of options
            
            
            2
                years
            
            
            2
                years
            
            
            3
                yearsBlock
                discount applied
            
            
            —
            
            
            —
            
            
            —




In
      December 2005, the FASB issued SFAS No. 123 (revised 2005), Share-Based Payment,
      which is a revision of SFAS No. 123, Accounting for Stock-Based Compensation.
      SFAS No. 123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued
      to
      Employees and amends SFAS No. 95, Statement of Cash Flows. Effective for the
      years on or after December 15, 2005, the Company will recognize all share-based
      payments to employees, including grants of employee stock options, in the
      statement of operations based on their fair values.




39




**NOTE
      2.RESTATEMENT OF RESULTS**




We
      have
      determined that, in certain cases, we misinterpreted or misapplied Generally
      Accepted Accounting Principles (“GAAP”) in our 2004 and 2005 consolidated
      financial statements and, accordingly, we have restated our consolidated
      financial statements for the periods ended December 31, 2004 and
      2005.




As
      discussed more fully below, the restatements involve, among other matters,
      revenue recognition issues related to reporting gross revenue versus net as
      per
      EITF Issue 99-19. In making these restatements, we have performed an internal
      analysis of our accounting policies, practices, procedures and disclosures
      for
      the affected periods.




*Summary
      of restatement items*




The
        following tables set forth the effects of the restatement adjustments discussed
        below on revenue; cost of sales; net loss; and loss per share as presented
        in
        our consolidated statements of operations for the years ended December 31,
        2004 and 2005, and intangible assets. The restatement adjustments are discussed
        in the paragraphs following the tables.


**Year
                ended December 31, 2005****Revenue**
            
            **Cost
                of Sales**
            
            **Net
                Loss******
            
            **Loss
                per**
              **Share******
            
            **Intangible
                Assets******Previously
                reported
            
            $
            81,143,838
            
            $
            80,730,141
            
            $
            (31,953,395
            )
            $
            (0.426
            )
            $
            9,907,550**Restatement
                Adjustments, net:**Net
                Revenue Adjustment
            
            $
            (70,999,058
            )
            $
            (70,999,058
            )
            
            —
            
            
            (0.00
            )2004
                Purchase accounting
            
            
            —
            
            
            —
            
            
            —
            
            
            (0.00
            )
            
            (2,778,000
            )Purchase
                accounting
            
            
            —
            
            
            —
            
            
            (7,129,550
            )
            
            (0.00
            )
            
            (7,129,550
            )Net
                restatements
            
            $
            (70,999,058
            )
            $
            (70,999,058
            )
            
            (7,129,550
            )
            
            (0.00
            )
            
            (9,907,550
            )As
                restated
            
            $
            10,144,780
            
            $
            9,731,083
            
            $
            (39,082,945
            )
            $
            (0.52
            )
            $
            —




40




**Year
                ended December 31, 2004********Revenue**
            
            **Cost
                of Sales**
            
            **Net
                Loss******
            
            **Loss
                per**
              **Share******
            
            **Intangible
                Assets******Previously
                reported
            
            $
            28,996,213
            
            $
            29,187,414
            
            $
            (13,166,869
            )
            $
            (0.02
            )
            $
            2,778,000**Restatement
                Adjustments, net:**Net
                Revenue Adjustment
            
            $
            (17,686,837
            )
            $
            (17,686,837
            )
            
            —
            
            
            (0.00
            )Purchase
                accounting
            
            
            —
            
            
            —
            
            
            (2,778,000
            )
            
            (0.00
            )
            
            (2,778,000
            )Net
                restatements
            
            $
            (17,686,837
            )
            $
            (17,686,837
            )
            
            (2,778,000
            )
            
            (0.00
            )
            
            (2,778,000
            )As
                restated
            
            $
            11,309,376
            
            $
            11,500,577
            
            $
            (15,944,869
            )
            $
            (0.02
            )
            $
            —




**Net
      Revenue Adjustment**





In
      2005,
      we engaged in transactions where we recorded our wholesale telecommunications
      revenues as Gross Revenue. After thorough review, we concluded that 2005
      revenues equaling $70,999,058 could not be supported and thus were reduced
      from
      previously reported revenues. The adjustments were offset against previously
      reported cost of sales by the same amount of $70,999,058.





In
      2004,
      we engaged in transactions where we recorded our wholesale telecommunications
      revenues as Gross Revenue. After thorough review, we concluded that 2004
      revenues equaling $11,190,902 could not be supported and thus were reduced
      from
      previously reported revenues, Also after applying the indicators, upon
      application of the EITF Issue 99-19 “Reporting Revenue Gross as a Principal
      versus Net as an Agent,” Accounting Principles Board Opinion No. 10 (“APB 10”)
“ Revenue
      Recognition Principle ,“
and
      Financial Accounting Standards Board Interpretation No. 39 (“FIN 39”)
“ Offsetting
      of Amounts Related to Certain Contracts ,” we
      concluded that we should record only the net revenue from certain wholesale
      telecommunications due to the indicators not supporting the criteria for gross
      revenue which further reduced revenues $6,495,935 for a total of $17,686,837.
      The adjustments were offset against previously reported cost of sales by the
      same amount of $17,686,837.




In
      our
      previously issued consolidated financial statements, we booked the gross
      consideration for all our wholesale telecommunications revenue without
      additional consideration to its characteristics. As part of our internal
      analysis of our accounting policies, practices and procedures in place in 2004
      and 2005, we did not review the previous accounting model for recording our
      revenues.




**Purchase
      Accounting**




As
      described in Item 7, Financial Statements, Note 9 - **** Asset
      Acquisition - Hotzone, we found a discrepancy in the application of purchase
      accounting for the June 2, 2005 transaction and have recorded an adjustment
      to
      correct it in our restated consolidated financial statements.




*Intangible
      Assets.* We
      recorded restatement adjustments to the amounts allocated to the
      technology-in-place intangible assets acquired in the transaction. The effect
      of
      the adjustments to intangible assets in 2005 was a reduction of $7,129,550
      and
      subsequently an increase to research and development expense in 2005 of
      $7,129,550.




As
      described in Item 7, Financial Statements, Note 8 - **** Asset
      Acquisition - Sanswire, we found a discrepancy in the application of purchase
      accounting for the April 15, 2004 transaction and have recorded an adjustment
      to
      correct it in our restated consolidated financial statements.




41




*Intangible
      Assets.* We
      recorded restatement adjustments to the amounts allocated to the
      technology-in-place intangible assets acquired in the transaction. The effect
      of
      the adjustments to intangible assets in 2004 was a reduction of $2,778,000
      and
      subsequently an increase to research and development expense in 2004 of
      $2,778,000.




**NOTE
      3. ACCOUNTS RECEIVABLE AND SALES - SIGNIFICANT CONCENTRATIONS OF CREDIT RISK
      AND
      ECONOMIC DEPENDENCE**




Five
      customers, Prince Telekom, Teleworks Wholesale Services, LP, Dollar Phone,
      Andiamo, and Intelco Communications accounted for 83% of the Company's sales
      for
      2005 and Three customers, Gatesway Online, Ltd., GTCC Qualnet Communications,
      Ltd., and Transglobal Ventures, Inc., accounted for 88% of the Company's sales
      for 2003, including 19% attributable to the Brazil network in 2004, 46% to
      the
      Mexico (including 42% related to our Mexico network and 4% unrelated to our
      network) in 2004, and 76% and 29% to the Philippine network in 2005 and 2004
      respectively. Four of the customers for the international networks account
      for
      92% of accounts receivable as of December 31, 2004.





Sales
      attributable to foreign operations for the year ended December 31, 2005 were
      $9,183,407 or 91% of total sales; for December 31, 2004, were $11,096,261 or
      98%
      of total sales; and for December 31, 2003 were $11,256,907 or 99% of total
      sales. The amounts include $7,674,615 or 76% of totals sales for the
      Philippines. For prior years, revenues of $2,147,119 or 7% for 2004 and
      $2,923,981 or 26% for 2003 from Brazil and $5,244,478 or 46% for 2004 and
      $8,052,143 or 71% from Mexico. Revenue is attributable to these countries,
      since
      calls either originate or terminate in these countries. All transactions were
      accounted for in U.S. currency, and no gain or loss was recorded on fluctuations
      in foreign currency.





In
      connection with the Brazil network, $1,903,264 and $1,955,818 during years
      ended
      December 31, 2004 and 2003, respectively, was paid by our Brazilian network
      customer directly to a local provider of network termination services, and,
      accordingly, the accounts receivable due from the customer was reduced by the
      same amounts. There were no such transactions during 2005.





In
      connection with the Mexico network, $4,485,030 and $5,609,939 during the years
      ended December 31, 2004 and 2003, respectively, was paid by our Mexico network
      customer directly to a local provider of network termination services, and,
      accordingly, the accounts receivable due from the customer was reduced by the
      same amounts. There were no such transactions during 2005.





During
      the year ended December 31, 2005, the Company increased its allowance for
      doubtful accounts by $1,373,458, predominantly for the receivables from the
      Mexico and Brazil networks, representing all of the amounts receivable, which
      have not been received as of the date of this report. The Company also charged
      off the accounts receivable and decreased its allowance account by $2,374,304,
      related to the receivables from Mexico and Brazil, resulting in an allowance
      for
      doubtful accounts of $409,100 as of December 31, 2005 primarily attributable
      to
      the portion of the Mexico receivables that are not considered uncollectible
      as
      of the date of this report.





**NOTE
      4. PREPAID EXPENSES AND EXPENSE-RELATED PARTY**





PREPAID
      EXPENSES





Prepaid
      expenses include primarily $117,678 of payments made to telecom carriers for
      prepaid minutes. For the 2004 the balance was for prepaid leases and prepayments
      to telecom carriers.





PREPAID
      EXPENSE - RELATED PARTY - ISG JET, LLC





On
      October 11, 2005, the company entered into an arrangement with ISG Jet, LLC
      for
      travel services. The agreement provides the Company with the ability to utilize
      executive air travel services at a reduced rate over a two-year period. The
      Company made a payment of $185,960, which includes $60,960 in cash and 81,168
      shares of the company's common stock, which was valued at $125,000 (valued
      at
      $1.54 per share). The Company maintains a prepaid balance that is being reduced
      over the term of the agreement, which ends in September 2007. The Parent company
      of ISG Jet, LLC is owned by Investor Source Group, LLC, which is owned 100%
      by
      Steven King, Executive Vice President of GlobeTel.





LOANS
      TO
      EMPLOYEES





This
      represents advances made by the Company to non-officer employees for payment
      of
      payroll taxes on stock options exercised during 2005. The company will recover
      this amount from the employees during the first quarter of 2006.





**NOTE
      5. DEPOSITS ON EQUIPMENT PURCHASES**





This
      represent payments made for the new MasterCard Switch for $124,993 as of
      December 31, 2005, as compared to $88,994 as of December 31, 2004.




42





**NOTE
      6. PROPERTY AND EQUIPMENT**





PROPERTY
                AND EQUIPMENT CONSISTED OF THE FOLLOWING:
            
            2005
            
            2004Telecommunications
                equipment
            
            $
            1,356,966
            
            $
            566,226Assets
                not yet placed in service
            
            
            5,267,526
            
            
            -
                0 -Computer
                and related equipment
            
            
            468,916
            
            
            143,802Office
                furniture and fixtures
            
            
            531,972
            
            
            5,730TOTAL
                PROPERTY AND EQUIPMENT
            
            
            7,625,380
            
            
            715,758Accumulated
                depreciation
            
            
            (596,958
            )
            
            (270,002
            )Property
                and equipment, net book value
            
            $
            7,028,422
            
            $
            445,756





Depreciation
      expense for the years ended December 31, 2005, 2004 and 2003, amounted to
      $236,018, $53,586 and $44,370, respectively, as reflected in the Consolidated
      Statement of Operations. Depreciation expense included in cost of sales was
      $95,525 in 2005, $116,435 in 2004 and $182,774 in 2003.





The
      total
      assets above include $5,267,526 of assets not yet placed into service as of
      December 31, 2005, primarily consisting of telecommunications equipment for
      our
      Stored Value activities, and, accordingly, no depreciation was recorded for
      these assets. These assets are expected to be placed into service during 2006,
      at which time depreciation will begin to be recognized.





**NOTE
      7 - INVESTMENT IN AND LOSS ON DISPOSITION OF UNCONSOLIDATED FOREIGN SUBSIDIARY
      -
      CGI**





In
      September 2003, the Company entered into an agreement with Advantage
      Telecommunications Ltd. (ATC), n/k/a Consolidated Global Investments, Ltd.
      (CGI)
      an Australian telecommunications corporation where, for a strategic investment
      of $1.2 million, the Company would own up to 50% of the stock of CGI, and would
      have control of the board of directors of CGI. CGI had operations in England
      and
      Hong Kong and had points of presence in over 15 countries. The agreement was
      subsequently modified to where our investment of $1.2 million would be for
      purchase of the CGI's telecommunication equipment and network operations in
      Hong
      Kong and England. Subsequently, CGI deconsolidated its subsidiaries and
      suspended operations.





As
      of
      December 31, 2003, the Company had remitted $302,300 to CGI and CGI's assignee.
      The Company remitted an additional $25,000 in February and $25,000 in March
      2004
      for a total of $352,300 and as of December 31, 2004 as partial payment towards
      the completion of the transaction.





Pursuant
      to additional modifications of the agreement, the Company issued 1,100,000
      (16,500,000 pre-split) restricted shares of the Company's common stock to CGI
      to
      complete the transaction as follows: (a) 666,667 (10,000,000 pre-split) shares,
      valued at $847,700, were issued to bring the investment balance to $1.2 million,
      and (b) an additional 433,333 (6,500,000 pre-split) shares, valued at $520,000
      were issued to bring the investment balance to $1,720,000. These amounts were
      agreed to by the Company and CGI.





The
      investment was structured by the parties and recorded by CGI as a secured
      convertible note payable to the Company, bearing interest at a rate of 12%,
      convertible, at the option of the Company, at a conversion rate of AUD$ 0.005
      per share. However, as agreed by the parties, neither the Company nor CGI
      received or paid, respectively, nor accrued such interest.





In
      May
      2004, ATC changed its name to Consolidated Global Investments, Ltd. (CGI) and
      all reports and filings were under the name of Consolidated Global Investments,
      Ltd., thereafter.





On
      June
      30, 2004, the Company exercised its option to convert the note and was issued
      467,327,745 shares of CGI stock. In addition, the Company took an assignment
      from CGI of a note payable to a CGI bank creditor in the amount of approximately
      AUD$ 750,000 (US $518,000) for a purchase price of 233,334 (3,500,000 pre-split)
      restricted shares of the Company's stock, in full payment of the balance due.
      Pursuant to an agreement between the Company and CGI, the Company converted
      the
      balance to CGI shares, at a conversion rate of AUD$.005 and on June 30, 2004,
      the Company was issued 147,968,635 shares of CGI stock.




43





As
      a
      result of the conversions, the Company held a total of 615,296,380 shares
      representing an ownership interest in CGI of 73.15%. In addition, as a result
      of
      and pursuant to the terms of conversion, the Company received options to acquire
      an additional 467,327,809 shares by June 30, 2007, at AUD$ 0.005 per
      share.





Notwithstanding
      the Company's 73.15% ownership interest and control of CGI's Board of Directors,
      the Company did not consolidate CGI into its accounts, whereas CGI is a foreign
      subsidiary of the Company, with no current operations. Furthermore, the primary
      asset of CGI as of December 31, 2004, consisted of the 16.5 million shares
      of
      the Company's stock. Such consolidation is not required by generally accepted
      accounting principles in the United States.





The
      Company's stock issuances described above were recorded at par value, and the
      carrying value of the Company's investment in the unconsolidated foreign
      subsidiary is $352,300, representing the sum of cash advanced by the Company
      to
      CGI through December 31, 2004.





As
      of
      December 31, 2005 and 2004, and CGI's shares were not trading on the Australian
      Stock Exchange, or any other exchange. As of December 31, 2004, the Company
      was
      advised that CGI expected the shares to be relisted in the near-term. The
      Company intended to make CGI into an operating company, with operations in
      telecommunications and Sanswire projects, expanding the Company's presence
      in
      the Asian market, and resulting in the marketability of CGI's stock and
      potential income from the subsidiary. Upon the occurrence of such events, the
      Company planned to adjust the carrying value of and/or consolidate the
      subsidiary in accordance with generally accepted accounting principles used
      in
      the United States.





In
      addition, the Company had agreed with the Liquidator of CGI's former UK
      subsidiary to acquire telecommunication equipment owned by that former
      subsidiary valued by the Company at $128,210. Such agreement was nullified
      upon
      the divestiture described below.





During
      2005, CGI sold a total of 610,000 (9,150,000 pre-split) of the GlobeTel shares
      it owned, and, from the proceeds, CGI advanced to GlobeTel a net of $1,449,509
      ($1,607,174, less repayments of $157,665) for Sanswire licensing rights. In
      consideration of its movement to the American Stock Exchange, the Company
      decided to not proceed with its goals to list a company on the Australian Stock
      Exchange and decided to divest itself of its interests in CGI.





In
      December 2005, the parties agreed that: (1) GlobeTel would return all shares
      and
      warrants it held in CGI to CGI, resulting in complete elimination of any
      ownership interest in CGI; (2) GlobeTel would not be required to return the
      $1,449,509 advanced from CGI; (3) CGI would retain 333,334 (5,000,000 pre-split)
      shares of GlobeTel common stock; and (4) CGI would return to GlobeTel 280,000
      (4,200,000 pre-split) shares of GlobeTel common stock. As of the date of this
      report, a total of 256,666 shares were received from CGI. The Company is
      expected to receive the remaining 23,334 shares from CGI during 2006. The shares
      returned are to be utilized to satisfy the obligation with CSI (see Note
      11).





During
      2005, the Company recorded a loss of $352,300 upon disposition of the former
      unconsolidated foreign subsidiary, representing the cash invested in CGI through
      December 31, 2004. The $1,449,509 retained by the Company was reclassified
      to
      additional paid-in capital, because it represents monies derived from the sale
      of the Company stock.





**NOTE
      8 - ASSET ACQUISITION AND INTANGIBLE ASSETS - SANSWIRE
      (RESTATED)**




**Asset
      Purchase Agreement -Sanswire Technologies, Inc.**




In
      March
      2004, the Company entered into a binding letter of intent to purchase certain
      assets of Sanswire Technologies, Inc. and its subsidiary, Sanswire, Inc.
      (collectively, "Sanswire"), a company that is developing a National Wireless
      Broadband Network utilizing high-altitude airships called Stratellites that
      will
      be used to provide wireless voice, video, and data services. The definitive
      purchase agreement was signed and effective on April 15, 2004.




**Asset
      Purchase Agreement - Stratodyne, Inc. (restated)**




The
      Company entered into a purchase agreement, effective August 23, 2004, with
      Sanswire, Stratodyne, Inc. and its principal shareholder, Vern Koenig, for
      certain assets of Stratodyne and under substantially the same terms, conditions
      and consideration as the original Sanswire purchase agreement. The "Stratodyne"
      agreement supplements the original "Sanswire" agreement. Stratodyne was the
      primary contractor for Sanswire.




The
      assets acquired under the Sanswire and Stratodyne agreements consist primarily
      of intellectual property and proprietary rights in intellectual property. The
      Stratellite is similar to a satellite, but it is stationed in the stratosphere
      rather than in orbit. As of September 30, 2004, the Company had placed all
      of
      Sanswire's and Stratodyne's assets into Sanswire Networks, LLC, its
      Florida-based, wholly-owned subsidiary ("Sanswire-FL").




44




As
      consideration for the purchase, the Company issued 28 million shares of its
      common stock to Sanswire. In November 2004 all the final documents were
      delivered and the relationship was consummated. In September 2004, pursuant
      to
      the Stratodyne agreement, 2 million shares of the Company's common stock were
      issued directly to Stratodyne's principal shareholder. These shares are included
      in the 28 million shares originally issued to Sanswire, and, accordingly, the
      Sanswire shareholders will retain only 26 million shares issued and return
      2
      million of the previously issued shares to the Company. On February 5, 2005
      GlobeTel filed a registration statement to register shares associated with
      these
      agreements.




**Contingent
      Consideration**




In
      accordance with the Sanswire agreement, an additional 200 million shares were
      to
      be issued pursuant to the terms and conditions of the "successful commercial
      launch" of a commercial communications platform aboard an airship developed
      by
      Sanswire and Stratodyne by the December 31, 2005 closing date. The Stratodyne
      agreement provides that 50 million of the 200 million additional shares will
      be
      issued to Stratodyne or its assignee(s) and the remaining 150 million shares
      to
      Sanswire Technologies, Inc.




For
      purposes of the Sanswire purchase agreement, a "successful commercial launch"
      was to be deemed to have occurred if all the conditions in the agreement have
      been satisfied and all other conditions deemed material by GlobeTel are
      satisfied, as determined by GlobeTel in its sole discretion. A "successful
      commercial launch" will occur if (i) an airship (dirigible) is flown for a
      period of 90 consecutive days at an approximate altitude of 70,000 feet, without
      technical difficulty, (ii) a customer is able to receive both voice and Internet
      services at the same time when it uses the "Stratellite service", at a
      customer-premises equipment (“CPE”) cost of approximately $100, and (iii) at
      least 250,000 paying customers must be able to use the Stratellite service
      based
      on agreed upon engineering specifications. For these purposes, it is also
      assumed that the cost of each airship used in the Stratellite service will
      not
      exceed $3 million, the cost of each tracking earth station will not exceed
      $7
      million and that each earth station (if more than one) will have the ability
      to
      cover several deployed airships at one time. If the cost of any airship or
      earth
      station exceeds $3 million or $7 million, respectively, at the time that the
      "commercial launch" is being implemented, the project will not be deemed to
      be
      commercially viable and a "successful commercial launch" will not have
      occurred.




The
      Stratodyne agreement modified the definition of a "successful" commercial launch
      by eliminating the CPE cost provisions described in (ii) above, and eliminated
      all of the provisions of (iii) above, except that it is assumed that the cost
      of
      each airship used in the Stratellite service will not exceed $3 million. The
      other provisions above remain the same in the Stratodyne agreement.




**Accounting
      for Purchase Price (restated)**




The
      purchase price for the assets acquired was $2,800,000, based on a value of
      $ .10
      per share for the 28 million Company shares issued in the transaction. The
      Company allocated the purchase price based on the estimated fair market value
      of
      the asset acquired as follows: (a) Sanswire equipment - $32,000; and (b)
      Sanswire and Stratodyne research and development expense - $2,768,000. In
      addition, the Company recorded an additional $10,000 to the purchase price
      to
      account for estimated cost of issuing and registering the shares for public
      sale
      in connection with this transaction. Sanswire-FL's assets, liabilities, results
      of operations and cash flows are consolidated in these financial
      statements.




Since
      it
      is presently unknown whether or not Sanswire and Stratodyne will achieve the
      above referenced results required to be entitled to the contingent
      consideration, no amount for such contingent consideration was recorded as
      a
      liability or included in the allocation of the purchase price. The Company
      will
      record the 200 million contingent shares at fair value upon issuance of the
      shares or at such time that the Company may determine that the issuance of
      the
      shares is probable and the value ascribable to the shares is
      estimable.




Previously
      the Company reported the transaction with intangible assets that included
      technology-based, marketing-related, and contract-related assets. The Company
      determined that the intangible assets have an indefinite life, and, accordingly,
      was not subject to amortization. Instead, the Company would test the asset
      for
      impairment at each reporting period, and upon the occurrence of any significant
      event that may affect the carrying value of the assets. The Company tested
      the
      assets for impairment and determined that no impairment existed and no
      adjustment to the carrying value was required as of December 31, 2004. As noted
      in Note 2 - Restatements, the Company has adjusted the transaction to not
      include any intangible assets and instead chose to charge the $2,778,000 as
      a
      research and development expense in 2004.




The
      results of operations Sanswire-FL for the year ended December 31, 2004, which
      are consolidated in the Company's results of operations, included expenses
      of
      $746,826 with no sales or costs of sales.




**Stratellite
      Build-Out Memorandum of Agreement (“MOA”) and Advances to
      Sanswire**




An
      MOA
      between the Company and Mr. Koenig dated August 23, 2004, stated the following:
      Mr. Koenig agreed to resume and expedite the build-out of the prototype of
      the
      Stratellite; the Stratellite is a proprietary technology acquired by the Company
      as part of the asset purchase agreement with Sanswire; when completed, the
      prototype will be used for demonstration and testing for commercial use; the
      original expected completion of the build-out agreement was January 15, 2005;
      the Company agreed to provide funding to complete the build-out process of
      the
      Stratellite prototype; and the Company provided a total of
      $200,000.




45




The
      Company has provided amounts to or on behalf of Sanswire-FL in excess of the
      above amounts, including approximately $600,000 through December 31, 2004,
      and
      at total of approximately $1,000,000 through the date of this
      report.




**Employment
      Agreements**




In
      connection with the Sanswire asset purchase agreement, the Company also entered
      into three-year employment agreements with five former Sanswire Technology,
      Inc.
      executives. Michael Molen, Jairo Rivera, Brian Keith, Keith Sistrunk and Jane
      Molen were to serve as the Chief Executive Officer, Chief Financial Officer;
      Chief Operating Officer, Chief Technology Officer and Comptroller of
      Sanswire-FL, respectively. Mr. Molen was to receive an earn-out based on value
      of Sanswire-FL compared to the Company (exclusive of Sanswire-FL). If the value
      of Sanswire-FL was less than 24% of the value of the Company, Mr. Molen would
      be
      entitled to receive stock equal to 10% of GlobeTel common stock outstanding
      on
      the date of valuation. Mr. Molen had the right to select the valuation date
      and
      a mutually agreeable third party will evaluate the value of Sanswire-FL compared
      to GlobeTel.




As
      of
      September 30, 2004, the Company decided to restructure the operations of
      Sanswire, LLC and eliminate redundant positions. As a result, Mr. Molen has
      accepted the appointment as Chairman of Sanswire, LLC and a member of GlobeTel's
      Board of Directors and stepped down as CEO of Sanswire, LLC. The Company closed
      the Sanswire, Inc. offices in Atlanta and Mr. Sistrunk and Ms. Molen have
      separated from the Company.




In
      connection with the Stratodyne agreement, the Company entered into a three-year
      key employment agreement with Vernon Koenig, Stratodyne's principal shareholder,
      to perform services including, but not limited to, telecommunications services
      and other services that Mr. Koenig serves as Sanswire-FL's Chief Design
      Engineer, and is responsible for development of the Stratellite. Mr. Koenig
      will
      receive a salary of no less than $75,000 per year, plus grants of stock options
      based on performance evaluations given annually by the Company.




**Independent
      Contractor Agreement**




In
      September 2004, the Company entered into an agreement with Hotzone Wireless,
      LLC, a service provider for consulting/engineering services related to the
      Sanswire Stratellite project. The non-exclusive service provider will provide
      engineering / consulting services, transmission equipment, and installation
      and
      testing of equipment.




The
      term
      of the agreement is for six (6) months and shall automatically renew for
      additional one (1) year terms after the initial term unless terminated by either
      party. As initial compensation, Company will pay the service provider $10,000
      per month.





**NOTE
      9 - ASSET ACQUISITION AND INTANGIBLE ASSETS - HOTZONE
      (RESTATED)**





In
      September 2004, the Company entered into an independent contractor agreement
      with Hotzone Wireless, LLC (HotZone), a service provider for
      consulting/engineering services related to the Sanswire Stratellite project.
      The
      non-exclusive service provider provided engineering / consulting services,
      transmission equipment, and installation and testing of equipment. The term
      of
      the agreement was for six (6) months and was automatically renewable for
      additional one (1) year terms after the initial term unless terminated by either
      party. As initial compensation, Company paid the service provider $10,000 per
      month. This agreement was terminated during fiscal year 2005.





On
      June
      2, 2005, the Company entered into an agreement to acquire assets of HotZone,
      an
      advanced developer of WIMAX and extended range WIFI Systems with operations
      in
      the United States and Europe. The acquisition transaction, which closed during
      the three months ended September 30, 2005, was paid with $27,000 cash and
      provides for a total of 2 million (post split) shares of the Company's common
      stock to be issued in increments of 666,667 shares on each of the first, second,
      and third anniversary dates of the agreement, assuming that certain milestones
      are achieved. Additionally, the HotZone staff is entering into employment
      agreements with the Company.





The
      assets acquired under the HotZone agreement consist primarily of intellectual
      property and proprietary rights in intellectual property. As of September 30,
      2005, the Company had placed all of HotZone's tangible assets into GlobeTel
      Wireless Corp. (GlobeTel Wireless), its Florida-based, wholly-owned
      subsidiary.





ACCOUNTING
      FOR PURCHASE PRICE AND INTANGIBLE ASSETS





Whereas
      the milestones for the first year were defined, and the Company believed that
      achievement of such milestones for the first year are probable and the amount
      payable (with GlobeTel common stock) is measurable, the Company recorded the
      amounts during the three months ended September 30, 2005. The purchase price
      for
      the assets acquired was recorded at $2,280,334 based on the $27,000 paid in
      cash, plus $2,253,334, which represents the value of 666,667 (post split) shares
      of common stock payable on the first anniversary date. The shares were valued
      at
      $ 3.38 per share, based on the value of the Company's free-trading stock on
      the
      agreement date. The Company allocated the purchase price based on the estimated
      fair market value of the asset acquired as follows: (a) HotZone tangible assets
      $55,910; and (b) HotZone research and development expense -
      $2,224,424.




46





Initially,
      since the milestones to be achieved for the second and third years of the
      contract were undefined and it is unknown whether or not such milestones, even
      if defined, will be achieved, the Company had not recorded the additional
      consideration totaling 1,333,333 (post-split) shares issuable after year one
      of
      the agreement (666,667 issuable for each of years two and three).





Subsequently
      and as of December 31, 2005, the Company and HotZone agreed that any and all
      milestones, previously undefined, were in fact achieved. The Company recorded
      the additional contingent shares at fair value upon, since the Company has
      determine that the issuance of the shares is probable and the value ascribable
      to the shares is measurable. Accordingly, as of December 31, 2005, the Company
      recorded the additional 1,333,334 (post-split) shares payable, which were valued
      at $4,909,665, which represents a based share of 1,333,334 (post-split) shares,
      value at $3.68 per share, based on the value of the Company's free-trading
      stock
      as of December 31, 2005, and increased the HotZone intangible asset value
      accordingly. As of the date of this report, none of the shares payable to
      HotZone have been issued. The first tranche of shares were delivered in June
      2006 and the remainder of the shares were delivered in May 2007.




Previously
      the Company reported the transaction with intangible assets that included
      technology-based, marketing-related, and contract-related assets. The Company
      determined that the intangible assets have an indefinite life, and, accordingly,
      was not subject to amortization. Instead, the Company would test the asset
      for
      impairment at each reporting period, and upon the occurrence of any significant
      event that may affect the carrying value of the assets. The Company tested
      the
      assets for impairment and determined that no impairment existed and no
      adjustment to the carrying value was required as of December 31, 2005. As noted
      in Note 2 - Restatements, the Company has adjusted the transaction to not
      include any intangible assets and instead chose to charge the $7,129,550 as
      a
      research and development expense in 2005.





**NOTE
      10 - NON-READILY MARKETABLE AVAILABLE-FOR-SALE EQUITY
      SECURITIES**





NETWORK
      SALES - CHARTERHOUSE INVESTMENT HOLDINGS, LTD.





In
      May
      2002, the Company entered into a Network Purchase Agreement with IP World Ltd.,
      (IPW) an Australian corporation to build as many as five (5) networks to be
      located in different countries throughout the world. As payment for each network
      the Company agreed to accept 64 million shares of IPW stock, at an agreed-upon
      value of $ .10 (US) per share, in full payment of the promissory note for the
      Brazil and Philippines networks. The IPW shares were not listed for sale on
      the
      Australian Stock Exchange (ASX) or any other domestic or international
      securities exchange. At the time, the Company was informed that such listing
      was
      imminent, and the Company would be able to sell all or a portion of the IPW
      shares.





The
      above
      agreements and transactions were facilitated by and through Charterhouse
      Consultancy Service, Ltd, a Nevis corporation, and its successor corporation,
      Charterhouse Investment Holdings Ltd., a Malaysian corporation (collectively
      known as "Charterhouse"), and Global VoIP (GVoIP), a Delaware Corporation,
      of
      which Timothy Huff, the Company's current CEO was a 99% owner and officer.
      Although Mr. Huff, by and through GVoIP, originally functioned as consultant
      to
      Charterhouse, neither Mr. Huff nor GVoIP were directly compensated for
      participating in the agreements and transactions described above and below.
      Instead, Mr. Huff became an officer and a Director of the Company and assigned
      any and all interest GVoIP had to the Company without compensation. GVoIP was
      dissolved immediately thereafter.





In
      connection with agreements between Charterhouse and the Company, Charterhouse
      paid for the two networks sold to date by the transfer of shares in IPW to
      the
      Company. In that connection, Charterhouse maintained 70 million IPW shares
      in
      escrow for the Company, and, accordingly, the Company was deemed the beneficial
      owner of the shares.





As
      of
      June 30, 2003, the Company had included in its current assets, $1,600,000 in
      non-readily marketable, available-for-sale equity securities, which represent
      16
      million shares of IP World (IPW) unrestricted stock, valued at $.10 per share,
      held in the Company's name and $4,301,500 in non-readily marketable, available
      for sale equity securities, due from a related party, Charterhouse, which
      represent 70 million shares of IPW restricted stock valued at $.06145 per share,
      held by Charterhouse on the Company's behalf.





As
      of
      September 30, 2003, IP World Ltd. was in liquidation and was no longer listed
      in
      the Australian Exchange. The Company is no longer transacting with IPW to move
      out of liquidation and be relisted in the Australian Exchange. Therefore, the
      Company charged off $4,301,500 in stock receivable as well as the $1,600,000
      in
      stock it had in its name during the three months ended September 30, 2003.
      As of
      December 31, 2004, the Company believes that the likelihood of recovering any
      such amounts is remote.




47





SERVICE
      AND INSTALLATION AGREEMENTS





In
      June
      2002, the Company entered into a one-year service agreement with IP World Ltd.
      for $240,000, related to servicing the Brazil network, the revenues from which
      are recognized ratably over the term of the agreement, beginning in July 2002.
      Revenue of $120,000 was initially recognized in connection with this
      agreement.





In
      July
      2002, the Company also entered into an installation and one-year service
      agreement with IP World Ltd. for $300,000 ($60,000 for installation and $240,000
      for maintenance), related to the Philippines network. The revenues from
      installation were recorded during 2002. The revenues from maintenance services
      were recognized ratably over the term of the agreement, beginning in October
      2002. Revenue of $60,000 for maintenance services was initially recognized
      during 2002.





In
      2003,
      the Company continued to report revenues for the agreement for the first and
      second quarter of the year. Upon writing off the receivable as discussed above,
      no further revenue was recognized by the Company.





**NOTE
      11 - LOANS AND ACCOUNTS PAYABLE TO RELATED PARTY -
      CHARTERHOUSE**





In
      October 2002, the holders of two promissory notes agreed that in lieu of payment
      of principal and interest under the loans, each to accept six (6) million shares
      (400,000 post-split) of common stock of GlobeTel as payment, which were paid
      to
      the note holders directly by the Company's primary customer during 2002, who
      was
      also a consultant (Charterhouse). Accordingly, the Company recorded the
      $300,000, plus interest of $11,960, as a loan payable to Charterhouse. In
      January 2003 Charterhouse loaned an additional $50,000, for total loans payable
      of $361,960. As of December 31, 2004, these amounts, as well as $135,000 payable
      for consultancy services rendered in 2002, were settled for Series B preferred
      stock. See Note 26 below.





**NOTE
      12 - CENTERLINE COMMUNICATIONS, LLC AND DUE TO RELATED PARTY - CSI**





CENTERLINE
      COMMUNICATIONS, LLC.





On
      June
      30, 2004, the Company entered into an operating agreement with Carrier Services,
      Inc. ("CSI") a Nevada corporation, also a telecommunications company, to operate
      Centerline Communications, LLC, a wholly-owned subsidiary of the
      Company.





The
      purposes of Centerline and its subsidiaries are to build telecommunications
      revenue and client base, utilizing each party's network and financial resources
      and to engage in any other business or activity that is necessary and proper
      to
      accomplish the above purposes.





Pursuant
      to the agreement, the Company was responsible for all costs associated with
      the
      operation and maintenance of the Prepaid Calling Card Platform, all expenses
      related to funding, staffing, technical support, customer service, equipment,
      and credit facilities. CSI was responsible for all costs and responsibilities
      associated with operation of the termination network, providing network
      facilities for the termination of carrier traffic, administer and operate the
      termination network, including subscriber accounts and tracking of minutes,
      all
      training and salary expenses of its sales personnel, all marketing expenses
      connected with the sale of the calling services and all other organizations
      related expense in any foreign base operation in which the LLC is
      operating.





The
      agreement provided for minimum selling requirements of $50 million per year
      in
      revenues for the LLC. If the LLC brought in $50 million in revenues at the
      end
      of the first year of operation, CSI will receive $1 million of the Company's
      publicly traded stock. If CSI repeats the $50 million in revenues in year two,
      CSI would receive another $1 million of the Company's publicly traded stock.
      The
      initial term of the agreement was for two years and automatically renewable
      for
      another two years.





The
      parties subsequently modified the agreement to provide for minimum selling
      requirements of $25 million in revenues for the LLC. Upon the LLC achieving
      in
      $25 million in revenues, CSI will receive 333,333 (5 million pre-split) shares
      of the Company's publicly traded stock.





"PARTNER
      INCENTIVE AND FINANCING AGREEMENTS"





The
      Company uses the term "partner" in a sense different than the strict legal
      definition. Herein, the term "partner" is equivalent to "business associate."
      During 2004, the Company, Centerline Communications ("Centerline") and its
      subsidiaries entered in "Partner Incentive and Financing Agreements" with
      various parties ("Partners") in the business of providing the transmission
      of
      wholesale voice and/or data communications services to domestic and
      international destinations utilizing a proprietary call processing platform,
      technologies, software and other equipment ("Calling Services") to produce
      profitable revenues utilizing the Calling Services of the partners for an
      initial term of two (2) years.




48





The
      "Partners" were to be compensated on a semi-annual basis with a grant of equity
      and cash commissions. These grants and commissions were to be paid out by
      Centerline, utilizing cash generated by the operations and stock given by the
      Company as part of the original agreement between CSI and the Company, based
      on
      reaching certain revenue and profitability milestones. Upon cessation of the
      prior joint business operations of the Company and CSI in February 2005, the
      Partner Incentive and Financing Agreements were terminated and no amounts were
      paid, due or owing by the Company in connection with these
      agreements.





DUE
      TO
      RELATED PARTY - CSI





The
      required revenues of $25 million were achieved in January 2005 and CSI became
      entitled to the 333,333 (5 million pre-split) shares. As of December 31, 2004,
      the Company recorded $404,707 due to CSI, computed by applying a ratio, based
      on
      the revenues achieved through December 2004 (approximately $18.4 million)
      compared to the required $25 million, to the number of shares to be issued
      recorded at a price $1.65 ($ .11 pre-split) per share, the closing market value
      of the Company's stock as of December 31, 2004.





CSI
      owed
      the Company a total of $401,723 as of December 31, 2004, consisting of the
      amounts due for accounts receivable collected by CSI on behalf of the LLC and
      for accounts receivable, pre-paid expenses and accounts payable assumed by
      CSI,
      and payments made by the Company on behalf of CSI, net of any payments made
      by
      CSI on behalf of the Company. The Company offset the $404,707 due to CSI against
      the $401,723 due from CSI, to result in a net amount due to CSI of $3,024 as
      of
      December 31, 2004, which was included in accounts payable.





In
      February 2005, the Company received $516,093 from proceeds of the sales of
      3
      million pre-split shares (200,000 post split) of the Company's common stock
      which was sold by CGI and advanced to GlobeTel (see Note 5 above), from which
      $100,000 was paid to CSI and the remaining amounts were held by the Company
      to
      collateralize the amounts due to the Company from CSI. Subsequently, the Company
      and CSI agreed to offset the $401,723 owed to GlobeTel against the shares owed
      by GlobeTel to CSI.





The
      Company and CSI mutually decided to conclude and restructure their joint
      business operations as of February 6, 2005. Upon completion of the parties
      reconciling and agreeing upon the final amount due from CSI, CSI and the Company
      agreed that the remaining amount due to CSI will be paid by the Company with
      remaining 133,334 (2 million pre-split) shares due to CSI, and the parties
      entered into new agreements.





In
      addition, the Company agreed to issue a total 66,667 (1 million pre-split)
      additional shares to CSI for additional revenues of approximately $10 million
      generated during the three months ended March 31, 2005. Commissions in the
      amount of $162,335 were recorded, based on the value of the Company's
      free-trading stock on the dates of issuance of the shares.





The
      Company entered into two asset purchase agreements with CSI to acquire
      telecommunication equipment totaling $837,836. The parties agreed that the
      purchase price for this equipment would be paid with (1) 233,333 (3,500,000
      pre-split) shares of GlobeTel's common stock; and (2) $286,136 in cash. In
      addition, the purchase agreement also required GlobeTel to provide $150,000
      for
      the reconstruction and establishment of a new telecom switch site in Los
      Angeles, CA. GlobeTel has complied with this provision.





The
      Company also acquired from CSI additional telecommunications equipment valued
      at
      $58,206 and paid with 38,730 (580,950 pre-split) shares of GlobeTel's common
      stock.





As
      partial payment for the above shares, in December 2005, the Company received
      $111,325 from proceeds of the sales of 30,000 (450,000 pre-split) shares of
      the
      Company's common stock which was sold by CGI and advanced to GlobeTel (see
      Note
      5 above), which was in turn paid to CSI.





Based
      on
      the above transactions, as of December 31, 2005 the balance owed to CSI includes
      (1) 336,667 (5,050,000 pre-split) shares of GlobeTel common stock; and (2)
      $106,231, related to the asset purchase agreements.





Subsequent
      to December 31, 2005, and as of the date of this report, the $106,231 cash
      balance was paid in full, and 226,666 (3,400,000 pre-split) shares of GlobeTel
      stock were transferred to CSI (from the GlobeTel shares returned by CGI; see
      Note 5 above), and 110,001 (1,650,000 pre-split) shares are currently
      owed.





In
      connection with these CSI arrangements, the Company recorded commission expenses
      of $848,880 and $404,747, respectively, for 2005 and 2004.





In
      2007,
      the Company issued 1,800,000 common shares to Monterosso for the remainders
      due
      on the Asset Purchase Agreement and 92,000 shares were paid to CSI with regard
      to the revenue related agreements




During
      a
      period of this contract, Mr. Joseph Monterosso was a principal of CSI and was
      an
      officer of GlobeTel Communications.




49




Based
      upon the recent lawsuit filed the Securities and Exchange Commission the Company
      is currently reevaluating the amounts paid under the above referenced contracts
      to determine whether or not such milestones were met by the use of fraudulently
      created invoices. Should the Company determine this to be the case it will
      seek
      to recover the shares and any other applicable damages and seek whatever
      appropriate remedies are available to the Company.





**NOTE
      13 - DUE TO FORMER EMPLOYEE IN GTE STOCK**





In
      September 2005, the Company issued a total of 98,983 shares pursuant to a
      severance and settlement agreement with a former employee, valued at $177,400,
      based on $1.79 per share, the closing price of the shares on the date of the
      agreement and registration of the shares. An additional $237,600 of shares
      are
      issuable pursuant to the agreement of which $118,800 is due January 4, 2006
      (and
      was paid as agreed) and $118,800 is due August 1, 2006. The former employee
      also
      received cash of $55,000 pursuant to the agreement.





**NOTE
      14 - ACCRUED OFFICERS' SALARIES AND BONUSES**





Effective
      January 1, 2002, GlobeTel entered into three-year employment agreements with
      its
      key management. For the year 2002, the agreements provide for annual
      compensation of $150,000 for its Chief Executive Officer (CEO), $125,000 each
      for its Chief Financial Officer (CFO) and Chief Operating Officer (COO) and
      $75,000 each for its Chief Administrative Officer (CAO) and VP of Network
      Operations. Further, there remained an employment contract with its President,
      as described below, which calls for annual salaries of $100,000 per annum.
      In
      addition to the base compensation, the employment agreements provide for payment
      of bonuses that at a minimum equal the executives' base compensation. As of
      December 31, 2002, the executives all agreed not to receive bonuses to which
      they were entitled pursuant to the employment agreement.





In
      2003,
      the base compensation increased to $175,000 for its CEO, $150,000 each for
      its
      CFO and COO, $90,000 each for its CAO and VP of Network Operations. In 2005,
      the
      base compensation increases to $200,000 for its CEO, $175,000 each for its
      CFO
      and COO, $120,000 for its CAO and $110,000 for its VP of Network Operations.
      Bonuses for each year will also be equal to the base salaries as a minimum,
      unless otherwise agreed to by the executives.





From
      October 1, 1996, through December 31, 2003, the Company had an employment
      agreement with its President wherein the Company agreed to pay compensation
      of
      $100,000 annually. In September 2003, the Company's president resigned effective
      December 31, 2003, but remained as a member of the board of directors of the
      Company throughout 2005.





In
      September 2003, the officers agreed to forego their accrued salaries in exchange
      for stock options at $.225 (0.015 pre-split) per share or 50% of the market
      price as of the exercise date. The officers subsequently exercised their stock
      options in January 2004.





As
      of
      December 31, 2003, the Company recorded accrued officers' salaries totaling
      $245,000. The officers again agreed to forego their accrued salaries in exchange
      for stock options at $.225 (0.015 pre-split) per share or 50% of the market
      price as of the exercise date. The officers subsequently exercised their stock
      options in January 2004.





As
      of
      December 31, 2005, the Company recorded accrued officers' salaries totaling
      $97,382 compared to $198,333 for year ending December 31, 2004, which were
      subsequently paid in January 2006 and 2005, respectively.





**NOTE
      15 - ACCRUED EXPENSES AND OTHER LIABILITIES**





Accrued
      expenses and other liabilities consisted of the following:





2005
            
            2004Interest
            
            
            3,105
            
            
            3,436Payroll
                Liabilities
            
            
            238,243
            
            
            -0-Rent
            
            
            22,467
            
            
            -0-Professional
                Fees
            
            
            281,821
            
            
            90,000ACCRUED
                EXPENSES AND OTHER LIABILITIES
            
            
            545.636
            
            
            93,436




**NOTE
      16 - CAPITAL AND OPERATING EQUIPMENT LEASE OBLIGATIONS**





Capital
      lease obligations as of December 31, 2003, consisted of an amount payable for
      telecommunications equipment, which was abandoned prior to 2003, and the
      liability was subsequently written off in 2004. See Note 21 below regarding
      disposition of this obligation.




50





In
      March
      2005, the Company entered into a lease agreement for office equipment, under
      which the Company must pay $279 per month, plus sales tax, for a period of
      39
      months. The Company expects to have use of the equipment for the substantial
      portion of its useful life and the lease provides for a bargain purchase option,
      wherein the Company may acquire ownership of the asset at the end of the lease
      for 10% of its fair market value. Accordingly, the lease transaction was
      recorded as a capital lease obligation and ascribed an initial value to the
      asset and principal amount due on the lease of $9,554, based on the present
      value of the monthly payments with an imputed interest rate of 8%. The balance
      on this obligation had been paid by the Company and there were no lease
      obligations recorded as payable as of December 31, 2005.





Interest
      expense recorded on all capital lease obligations of the Company amounted to
      $480, $2,561 and $15,924 for the years ended December 31, 2005, 2004 and 2003,
      respectively.





In
      July
      2004, the Company entered into a lease agreement for telecommunications
      collocation equipment, under which they made a down payment and other fees
      totaling $37,635 and must pay $3,778 for 24 months. Since the transaction does
      not qualify as a capital lease, the company charges the monthly payments to
      cost
      of sales and amortizes the prepayment to cost of sales over the period of the
      lease.





**NOTE
      17 - NOTES AND LOANS PAYABLE**





In
      January 2003, the Company received a $50,000 loan from Charterhouse. This loan
      payable, as well a previous loan of $311,960 was unsecured, non-interest bearing
      and have no formal repayment terms. In addition, the Company had an outstanding
      account payable to Charterhouse for $135,000 in connection with consulting
      services provided in 2002. During 2004, all of the amounts owing to Charterhouse
      were paid in full with the issuance of $500,000 of Series B preferred stock.
      The
      $3,040 difference between the total amounts payable and amount representing
      the
      preferred stock issued was expensed in 2004.





CONVERTIBLE
      SUBORDINATED NOTES





On
      August
      21, 2002, the Company executed a $125,000 convertible subordinated promissory
      note payable to an unrelated third party, due August 21, 2003, with interest
      payable monthly at a rate of 12% per annum. The note is collateralized with
      500,000 post-split (7.5 million - pre-split) shares of the Company's common
      stock, which were issued by the Company and held in escrow under the agreement.
      The Company recorded the issuance of these shares at par value. The note is
      convertible into shares of the Company's common stock at the option of the
      holder in whole or in part, in accordance with the terms of the note. The
      conversion price for this note in effect on any conversion date shall be the
      lesser of $3.75 post-split ($.25 pre-split) or 75% of the per share market
      value
      price as of the close of business on the conversion date. Any conversion
      pursuant to this agreement shall be for a minimum principal of $10,000 and
      until
      the first day of the month preceding the maturity date of this note, the holder
      may not, during any 30-day period, convert more than the greater of $100,000
      of
      the principal amount of this note, or 10% of the preceding month's trading
      value
      of the common stock as reported by the principal market in which the common
      stock is traded.





In
      July
      2003, the holder exercised his right to convert the debt into shares of the
      Company's common stock in accordance with the terms of the note. The conversion
      rate was determined to be $0.6 post-split ($.04 pre-split) and accordingly,
      the
      holder retained / 203,704 (3,055,556 pre-split) shares and returned 296,297
      (4,444,444 pre-split) to the Company.





On
      August
      27, 2002, the Company executed a $125,000 convertible subordinated promissory
      note payable to an unrelated third party, due August 27, 2003, with interest
      payable monthly at a rate of 12% per annum. The note is collateralized with
      500,000 (7.5 million - pre-split) shares of the Company's common stock, which
      were issued by the Company and held in escrow under the agreement. The Company
      recorded the issuance of these shares at par value. The note is convertible
      into
      shares of the company's common stock at the option of the holder in whole or
      in
      part, in accordance with the terms of the note. The conversion price for this
      note in effect on any conversion date shall be the lesser of $3.75 post-split
      ($.25 pre-split) or 75% of the per share market value price as of the close
      of
      business on the conversion date. Any conversion pursuant to this agreement
      shall
      be for a minimum principal of $10,000 and until the first day of the month
      preceding the maturity date of this note, the holder may not, during any 30-day
      period, convert more than the greater of $100,000 of the principal amount of
      this note, or 10% of the preceding month's trading value of the common stock
      as
      reported by the principal market in which the common stock is
      traded.





In
      December 2003, the holder exercised his right to convert the debt into shares
      of
      the Company's common stock in accordance with the terms of the note. The
      conversion rate was determined to be $0.525 ($.035 pre-split) and accordingly,
      the holder retained 233,333 (3,500,000 pre-split) shares and returned 266,667
      (4,000,000 pre-split) shares to the Company.




51





On
      October 22, 2002, the Company executed a $125,000 convertible subordinated
      promissory note payable to an unrelated third party, due October 22, 2003,
      with
      interest payable monthly at a rate of 12% per annum. The note is collateralized
      with 1 million post-split / 15 million pre-split shares of the Company's common
      stock, which were issued by the Company and held in escrow under the agreement.
      The Company recorded the issuance of these shares at par value. The note is
      convertible into shares of the Company's common stock at the option of the
      holder in whole or in part, in accordance with the terms of the note. The
      conversion price for this note in effect on any conversion date shall be the
      lesser of $3.00 post-split / ($.20 pre-split) or 75% of the per share market
      value price as of the close of business on the conversion date. Any conversion
      pursuant to this agreement shall be for a minimum principal of $10,000 and
      until
      the first day of the month preceding the maturity date of this note, the
      holder


may
      not,
      during any 30-day period, convert more than the greater of $100,000 of the
      principal amount of this note, or 10% of the preceding month's trading value
      of
      the common stock as reported by the principal market in which the common stock
      is traded.





On
      November 18, 2002, the Company executed a $125,000 convertible subordinated
      promissory note payable to an unrelated third party, due November 18, 2003,
      with
      interest payable monthly at a rate of 12% per annum. The note is collateralized
      with 1 million (15 million pre-split) shares of the Company's common stock,
      which were issued by the Company and held in escrow under the agreement. The
      Company recorded the issuance of these shares at par value. The note is
      convertible into shares of the Company's common stock at the option of the
      holder in whole or in part, in accordance with the terms of the note. The
      conversion price for this note in effect on any conversion date shall be the
      lesser of $3.00 ($.20 pre-split) or 75% of the per share market value price
      as
      of the close of business on the conversion date. Any conversion pursuant to
      this
      agreement shall be for a minimum principal of $10,000 and until the first day
      of
      the month preceding the maturity date of this note, the holder may not, during
      any 30-day period, convert more than the greater of $100,000 of the principal
      amount of this note, or 10% of the preceding month's trading value of the common
      stock as reported by the principal market in which the common stock is
      traded.





The
      October 22 and November 18 notes were from the same investor, and in July 2003,
      the holder exercised the right to convert the debt into shares of the Company's
      common stock in accordance with the terms of the note. The conversion rate
      was
      determined to be $.36 ($.024 pre-split) and accordingly, the holder retained
      694,444 (10,416,666 pre-split) shares and returned 1,305,556 (19,583,334
      pre-split) shares to the Company.





On
      November 25, 2002, the Company executed a $125,000 convertible subordinated
      promissory note payable to an unrelated third party, due November 25, 2003,
      with
      interest payable monthly at a rate of 12% per annum. The note is collateralized
      with 1 million (15 million pre-split) shares of the Company's common stock,
      which were issued by the Company and held in escrow under the agreement. The
      Company recorded the issuance of these shares at par value. The note is
      convertible into shares of the Company's common stock at the option of the
      holder in whole or in part, in accordance with the terms of the note. The
      conversion price for this note in effect on any conversion date shall be the
      lesser of $3.00 ($.20 pre-split) or 75% of the per share market value price
      as
      of the close of business on the conversion date. Any conversion pursuant to
      this
      agreement shall be for a minimum principal of $10,000 and until the first day
      of
      the month preceding the maturity date of this note, the holder may not, during
      any 30-day period, convert more than the greater of $100,000 of the principal
      amount of this note, or 10% of the preceding month's trading value of the common
      stock as reported by the principal market in which the common stock is
      traded.





Also
      on
      November 25, 2002, the Company executed a second $125,000 convertible
      subordinated promissory note payable to an unrelated third party, due November
      25, 2003, with interest payable monthly at a rate of 12% per annum. The note
      is
      collateralized with 1 million (15 million pre-split) shares of the company's
      common stock, which were issued by the Company and held in escrow under the
      agreement. The company recorded the issuance of these shares at par value.
      The
      note is convertible into shares of the company's common stock at the option
      of
      the holder in whole or in part, in accordance with the terms of the note. The
      conversion price for this note in effect on any conversion date shall be the
      lesser of $3.00 ($.20 pre-split) or 75% of the per share market value price
      as
      of the close of business on the conversion date. Any conversion pursuant to
      this
      agreement shall be for a minimum principal of $10,000 and until the first day
      of
      the month preceding the maturity date of this note, the holder may not, during
      any 30-day period, convert more than the greater of $100,000 of the principal
      amount of this note, or 10% of the preceding month's trading value of the common
      stock as reported by the principal market in which the common stock is
      traded.





Both
      notes dated November 25, 2002 were from the same investor, and in July 2003,
      the
      holder exercised the right to convert the debt into shares of the Company's
      common stock in accordance with the terms of the note. The conversion rate
      was
      determined to be $0.33 ($.022 pre-split) and accordingly, the holder retained
      740,741 (11,111,112 pre-split) shares and returned 1,259,259 (18,888,888
      pre-split) shares to the Company.





On
      November 5, 2002, the Company executed a second $125,000 convertible
      subordinated promissory note payable to an unrelated third party, due November
      5, 2003, with interest payable monthly at a rate of 12% per annum. The note
      is
      collateralized with 1 million (15 million pre-split) shares of the Company's
      common stock, which were issued by the Company and held in escrow under the
      agreement. The Company recorded the issuance of these shares at par value.
      The
      note is convertible into shares of the Company's common stock at the option
      of
      the holder in whole or in part, in accordance with the terms of the note. The
      conversion price for this note is of $0.375 ($.025 pre-split) per share. The
      note holder also received a common stock purchase warrant giving them the right
      to purchase 5 million shares of the Company's common stock at the price of
      $0.45
      ($.03 pre-split) per share. Subsequent to the execution of this note, additional
      amounts of $85,528 were received from the note holder, bringing the total
      balance to $210,528.




52





In
      May
      2003, the holder and the Company agreed that the balance of $210,528 be
      converted into shares of the Company's common stock and as a result the
      collateralized shares were then issued to the holder. In addition, it was agreed
      upon that the holder's 15 million shares are non-dilutable for 18 months from
      April 1, 2003. Further, the holder of the note is comprised of three (3) owners,
      one of whom is Timothy M. Huff who owns 40% of the entity. Timothy Huff is
      the
      CEO of the Company.





UNSECURED
      LOANS AND NOTES PAYABLE





In
      February 2003, the Company executed two unsecured promissory notes payable,
      each
      for $100,000 (to fund operations and pay operating expenses), to an unrelated
      third party, which is also a secured promissory note holder. Each note was
      originally due in May 2003, and included interest payable monthly at a rate
      of
      25% per annum. The Company and the note holder subsequently agreed to extend
      due
      dates of the loans on a month-to-month basis under the same interest rate.
      In
      February 2005, the Company paid both notes.





In
      February 2003, the Company executed a $40,000 promissory note payable to another
      party, due on demand with interest payable at 2.5% per annum. The Company repaid
      its $40,000 note payable during 2003.





In
      June
      2003, the Company executed a $200,000 promissory note payable to Commercebank,
      N.A., due in June 2005, with interest payable at a rate of one percent over
      the
      prime rate, currently 4%. In August 2005, the Company repaid its $200,000 loan
      with Commercebank, N.A. in full.





LETTER
      OF
      CREDIT AND BANK LOAN PAYABLE





As
      of
      December 31, 2002, the Company had a $500,000 letter of credit with
      Commercebank, N.A., guaranteed by Florida Export Finance Corporation (FEFC)
      and
      $200,000 letter of credit was issued to the Mexican telecom provider that
      provides local connectivity. In March 2003, the Company issued another $100,000
      to the same Mexican telecom provider. The remaining $200,000 was used by the
      Company as collateral for its $200,000 loan with Commercebank, N.A., the funds
      of which were used to purchase the telecom equipment used in the Brazil
      operations. The letters of credit issued to the Mexican telecom provider have
      been cancelled by the provider and have been returned.





The
      Company presently does not have any existing letters of credit but has the
      option of reopening the letter of credit with Commercebank, N.A. should the
      needs for it arise.





**NOTE
      18 - CONVERTIBLE DEBT AND PRIVATE PLACEMENTS**





CONVERTIBLE
      NOTES PAYABLE





In
      January 2005, the Company entered into financing agreements for convertible
      promissory notes payable totaling $1.8 million. Net proceeds of $1,579,487
      were
      received, after deducting costs and expenses related to the transaction. Under
      the agreements the notes were convertible into common stock of the Company
      at
      $1.20 ($.08 pre-split) per share. Prior to any notice of conversion, the Company
      had the right to redeem the note(s) at a premium, subject to a 3-day right
      to
      convert by the investor.





In
      addition, there were two types of warrants to purchase additional shares of
      common stock. There were 12,500,000 Class A Warrants (187,500,000 pre-split)
      exercisable at $1.80 ($.12 pre-split) per share and Redemption Warrants were
      to
      be provided in the event that the Company sought to redeem more than 50% of
      the
      principal of the note. They were given on the basis of 1,111 warrants for each
      $1,000 in principal the Company sought to redeem over $900,000. These Warrants
      are identical to the Class A Warrants except that they have an exercise price
      of
      $1.65 ($ .11 pre-split) per share.





In
      February 2005, the note holders elected to convert all of the notes in the
      amount of $1.8 million, plus accrued interest of $5,969. Pursuant to the
      conversion, total shares issued were 1,538,308 (or 23,074,615 pre-split)
      including 33,333 (500,000 pre-split) shares as commission to a
      promoter.





At
      the
      same time in February 2005, the 12,500,000 Class A Warrants were exercised
      at
      $1.65 ($ .11 pre-split) per share, except for one million shares at $1.84 ($
      .1227 pre-split) as agreed by the parties. Total net proceeds of $1,442,650
      were
      received and commissions totaling $80,208 were paid.





Upon
      agreement of the parties, in lieu of the Company exercising its redemption
      rights, an additional $1,237,500 was received in connection with the conversion,
      increasing the per share price to $2.85 ($ .19 pre-split).




53





On
      February 5, 2005, GlobeTel filed a registration statement with the Securities
      and Exchange Commission on Form SB-2 to register shares offered, plus additional
      shares totaling 75% of the underlying convertible notes and warrants to ensure
      that shares are available for conversion under all contingencies.





In
      addition, on August 31, 2005 the Company entered into subscription agreements
      with other investors for 5% convertible notes payable totaling $4.5 million,
      with 3 year Class A Warrants to purchase up to an additional $6,818,181 in
      common stock. Net proceeds of $4,150,730 were received, after deducting costs
      and expenses related to the transaction. The notes amortize at 12.5% per quarter
      through September 2007, payable each quarter in cash or common
      shares.





Under
      the
      agreements the notes are convertible into common stock of the Company at $
      1.65
      per share (post-split). Prior to any notice of conversion, the Company had
      the
      right to redeem the note(s) at a premium for cash, subject to a 5-day right
      to
      convert by the investor. The Investors also received one Class A Warrant to
      purchase one share of common stock for each share that the notes would be
      convertible into had they been converted on the closing date (August 31, 2005)
      (a total of 2,727,273 shares). The per share exercise price of the Warrants
      is
      $2.50.





In
      December 2005, the note holders elected to convert all of the notes in the
      amount of $4.5 million, plus accrued interest of $62,029. Pursuant to the
      conversion, total shares issued were 2,764,883 (post-split). Also in December
      2005, the investors exercised outstanding warrants to acquire a total of 272,727
      common shares at $2.50 per share for proceeds of $681,818.





PRIVATE
      PLACEMENTS





On
      May 9,
      2005, the Company entered into a private placement with a number of accredited
      investors, whereby these investors have purchased $2,357,960 of our common
      shares at a price of $ 2.886 ($ .1924 pre-split), with warrants to purchase
      up
      to an additional 571,924 (8,578,856 pre-split) shares of common stock at an
      exercise price of $ 5.0925 ($ .3395 pre-split). However, the subscription
      agreement with the investors allows for the price of the warrant to be adjusted
      should the Company offer equity securities at a lower price prior to the
      Warrants being exercised. As stated below the Company has entered into such
      an
      agreement and will be obligated to adjust the Warrant exercise price. The
      Company subsequently registered those shares on Form S-3 which has been declared
      effective by the Securities and Exchange Commission.





On
      May
      23, 2005, the Company accepted an additional subscription from one of the
      initial investors increasing their investment by $250,000 on the same terms
      and
      conditions as all the other investors.





The
      Company received net proceeds of $2,328,489 from the above transactions, after
      fees and costs of $279,471 related to the issuance.





In
      November and December 2005, the investors exercised outstanding warrants to
      acquire a total of 702,108 common shares at $1.65 per share for proceeds of
      $1,158,478.





Also,
      in
      May 2005, the Company issued an additional 291,317 (4,369,748 pre-split)
      unrestricted shares to an institutional investor that received shares for cash
      in private placements during 2004, pursuant to an anti-dilutive provision in
      the
      original agreement. These shares were recorded at par value. As previously
      disclosed, Timothy M. Huff, CEO of GlobeTel, held a 40% interest in this
      investment, and accordingly received 116,526 (1,747,899 pre-split) shares.





**NOTE
      19 - AGREEMENTS**





CONSULTING,
      INVESTMENT ADVISORY AND INVESTMENT BANKING AGREEMENTS





On
      August
      15, 2002, the Company entered into an agreement with Charles Morgan Securities,
      Inc. ("Charles Morgan") to provide consulting services for a period of 12
      months, including arranging for funding, assisting with corporate and business
      planning, advice regarding potential mergers and acquisitions, private
      placements of the Company's stock, and other related services.





The
      agreement provided that the Company pay Charles Morgan a monthly fee of $5,000
      from August to January 2003, and $10,000 thereafter for the next six months.
      The
      Company also paid an engagement fee of $30,000 upon initial
      funding.





In
      accordance with the agreement, the Company also paid Charles Morgan a total
      of
      2.7 million shares of common stock of the Company for services provided in
      fiscal 2002 and 1.3 million shares in fiscal 2003, for a total of 4 million
      shares.





In
      addition to the shares described above, in August 2002, Charles Morgan received
      180,000 (12.5 million pre-split) restricted shares (Rule 144) in connection
      with
      arranging for the convertible subordinated notes payable above. The Company
      valued the shares at $250,000, based on one-half of the closing bid price of
      the
      Company's shares on the date of issuance and charged this amount to consulting
      expense. Pursuant to the agreement, Charles Morgan received an additional
      833,333 (12.5 million pre-split) restricted shares (Rule 144) for arranging
      additional financing of $500,000 during the quarter ending December 31,
      2002.




54





During
      the third quarter 2002, Global VoIP, a principal customer and related party
      to
      the Company, paid Charles Morgan $35,000 for the initial monthly fee of $5,000
      and the engagement fee of $30,000. This amount was offset against the remaining
      accounts receivable balance owed by Global VoIP to the Company.





In
      January 2003, Fordham Financial Management, Inc. (Fordham Financial), an
      investment banking firm, based in New York City, assumed all functions and
      responsibilities of Charles Morgan Securities to provide consulting services.
      Under the agreement, the Company was obliged to pay a monthly fee of $10,000.
      In
      June 2003, the firm and the Company agreed to suspend the monthly fee until
      both
      parties agree it should resume. The Company paid total fees of $40,000 during
      the six months ended June 30, 2003. Pursuant to agreement, the Company issued
      4.9 million restricted shares of the Company's common stock as payment for
      services rendered. The Company charged $51,250 to expense during the three
      months ended September 30, 2003, based on an amount equal to one-half of the
      average bid and asked price of the Company's shares on the date of issuance.
      No
      further payments were made in the fourth quarter of 2003 as it relates to this
      investment banking agreement.





In
      October 2003, the Company entered into an agreement with Fordham Financial
      to
      raise $2,500,000 resulting in issuance of circular offering dated October 17,
      2003 (Preferred Stock, Series A). Fordham Financial agreed to receive 10%
      commission for the raising of the investments. In addition to the commissions
      totaling $250,000, Fordham Financial also received 57,500 Preferred Stock,
      Series A as additional compensation. Fordham Financial had arranged for
      subscriptions of $1,092,140 as of December 31, 2003 and had raised the full
      $2,500,000 as of January 31, 2004.





On
      August
      16, 2004, the Company entered into an investment advisory agreement with Charles
      Morgan Securities, Inc. (CMS) for term ending on December 31, 2005. CMS would
      render consulting services related to business development, corporate planning,
      investment and securities matters, including the Company's applying for trading
      on a higher listed exchange. As compensation for services, the Company will
      pay
      a one-time fee of 500 shares of Preferred Class C stock, convertible into 1%
      of
      the common shares of the Company after a one year holding period. Pursuant
      to
      the agreement, the compensation is not considered earned until when and if
      the
      advisor accomplishes the moving of the Company's stock from trading on the
      OTCBB
      to another trading board of higher standing by December 31, 2005. In May 2005,
      the Company did in fact move to a trading board of higher standing - the
      American Stock Exchange (AMEX).





During
      2005, the Company issued a total of 820,000 (post-split) shares valued at
      $1,230,000 in connection with its arrangements with CMS.





STORED
      VALUE, STRATELLITES, WIRELESS SERVICES AND OTHER TELECOMMUNICATIONS PROGRAMS
      AGREEMENTS





In
      June
      2004, the Company entered into an agreement with Bankcard Inc., a member of
      the
      RCBC Group, one of the largest private commercial bank and financial
      institutions in the Philippines to introduce a stored value card program for
      domestic and international use. Bankcard will be able to issue a Visa and
      MasterCard card program that will offer Overseas Filipino Workers and Filipinos
      in foreign countries, convenient, risk free and low cost international funds
      transfer and discounted long distance calling services. This agreement was
      facilitated by Four Star Consulting, a Manila, Philippine-based consulting
      group
      who was paid a fee of $10,000.





JOINT
      VENTURE AGREEMENT - ENGLEWOOD CORPORATION





On
      May 3,
      2004, the Company entered into a joint venture agreement and stock option plan
      with Englewood Corporation ("Englewood") and respectively with Joseph Seroussi,
      an individual ("the agreement"). Under the agreement, Englewood gives to the
      Company all of its current and new products and services in the telephony,
      financial and non financial services fields; all market contacts and
      relationships and existing and future telecommunications; non financial and
      financial contracts; and to develop the processing capabilities for transactions
      on networks in conjunction with ATM, debit and credit cards including but not
      limited to, the financial networks of MasterCard, MasterCard International,
      VISA
      and private banking ATM networks; along with the ability to market such products
      and services through strategic partners in various countries around the world.


Subject
      to the terms and conditions of the Agreement, the Company will earn 100% of
      all
      revenues and profits. During the three-year term of this agreement, Englewood
      at
      its sole discretion may elect to have a third party independent appraiser,
      mutually agreed to by both parties, determine the fair market value of the
      joint
      venture. The Englewood portion of the value of the joint venture will be equal
      to 20% of the fair market value of the Joint Venture.





At
      Englewood's sole discretion, Englewood may elect in whole or in part to exchange
      in whole or a portion of its interest in the joint venture for cashless options
      granted by the Company. The options granted by the company shall be at $.30
      ($.02 pre-split) per share of the Company's common stock. Once exercised, the
      options shall be distributed to Englewood over a three-year period in 12 equal
      parts. Englewood will have piggy back registration rights for a period of two
      years following the grant of each block of options.




55





Additionally,
      at the time of the Agreement, Seroussi will continue to serve as a consultant
      to
      the Company for a minimum period of three years. Subsequently, Seroussi and
      the
      Company entered in an Agreement whereby Seroussi has given up his consulting
      contract and on October 1, 2004, joined the Company as its Chief Technical
      Officer. All of the terms and conditions of the Agreement with Englewood remain
      the same.





During
      2005 and as of the date of this report, no transactions have occurred that
      would
      require recording or disclosure in the Company's financial statements related
      to
      these agreements other than 3 million restricted shares of the Company's common
      stock issued for consulting services, valued at $135,000, based on one-half
      of
      the closing price of the stock on date of issuance, and recorded in
      2004.





GLOBETEL
      WIRELESS NETWORK, PILOT PROGRAM





On
      August
      7, 2005, the Company entered into an agreement to provide a wireless
      communication network for a pilot program in Shenzhen, China with Guangdong
      Tietong South Communication Co. Ltd, a group company of China Tietong Telecom


Corporation,
      one of only 6 licensed telecom operators in China. Upon successful completion
      of
      the pilot program, GlobeTel Wireless and its local Chinese partners will
      commence a roll out of wireless communication networks throughout China to
      deliver voice, data and video applications. The agreement was reached with
      Nessociet Inc., an organization working towards the development of next
      generation wireless telephony services and NGN Telecom Corporation, the partner
      to Guangdong Tietong South Communication Co. Ltd., in marketing VoIP services
      in
      China. The Company will also utilize Nessociet Inc. who has become a reseller
      of
      GlobeTel Wireless networks and equipment in Asia. The Company is planning on
      initiating a test pilot in the region in the second quarter of
      2006.





During
      2005 and as of the date of this report, no transactions have occurred that
      would
      require recording or disclosure in the Company's financial statements related
      to
      this agreement.





JOINT
      VENTURE AGREEMENT - LEO A. DALY III AND J. RANDOLPH DUMAS





On
      July
      7, 2005, the Company entered into a joint venture agreement that will lead
      to
      the deployment of the Company's Stratellites(TM), throughout Europe, the Middle
      East, Africa, and the countries of the former Soviet Union. The joint venture
      is
      between Sanswire Networks LLC, a wholly-owned subsidiary of GlobeTel, and a
      venture headed by Leo A. Daly III and J. Randolph Dumas, noted international
      businessmen. Sanswire Networks, LLC will own 55% of the joint venture entity.
      In
      September 2005, Mr. Dumas joined the Company's Board of Directors.





During
      2005 and as of the date of this report, no transactions have occurred that
      would
      require recording or disclosure in the Company's financial statements related
      to
      this agreement.





JOINT
      VENTURE AGREEMENT - APOGEO ENTERPRISES CORPORATION





On
      July
      14, 2005, the Company's wholly-owned subsidiary, Sanswire Networks, LLC had
      entered into a joint venture agreement to deploy Stratellites(TM) throughout
      the
      country of Colombia. The agreement with Florida-based Apogeo Enterprises
      Corporation calls for a total of five Stratellites to be launched over the
      Latin
      American country to build a wireless broadband network that would be the first
      of its kind in the world.





The
      Joint
      Venture Agreement, signed on July 14, 2005, had a due date 90 days after
      signature. Within this timeframe, Apogeo was to provide Sanswire Networks,
      LLC
      with proof of funds. The company presented proof of funds after the 90 day
      period. Based on their efforts, Sanswire Networks, LLC decided to maintain
      a
      business relationship with Apogeo by signing a new Joint Venture Agreement
      on
      January 20, 2006. On February 17, 2006, the parties executed an addendum to
      this
      Agreement which states that Apogeo and Sanswire Networks, LLC will agree on
      the
      price per Stratellite to be paid by Apogeo upon execution of a letter of credit
      in the amount of no less than $15,000,000.





During
      2005 and as of the date of this report, no transactions have occurred that
      would
      require recording or disclosure in the Company's financial statements related
      to
      this agreement.





LICENSING
      AGREEMENT - RAPIDMONEY(R) CORPORATION





On
      July
      7, 2005, the Company entered into a licensing agreement with RapidMoney(R)
      Corporation that allows us to use and modify the RapidMoney(R) system. GlobeTel,
      along with its venture partner, Grupo Ingedigit ("GI") of Caracas, Venezuela,
      will incorporate the current RapidMoney(R) funds transfer software applications
      for merchant Point of Sale ("POS") terminals into the Company's Stored Value
      international remittance services. Furthermore, this license allows GlobeTel
      and
      GI to develop additional applications based on the RapidMoney(R) system that
      will be deployed in the retail locations which are offering their Stored Value
      Card Program services.




56





During
      2005 and as of the date of this report, no transactions have occurred that
      would
      require recording or disclosure in the Company's financial statements related
      to
      this agreement.





ALTVATER
      GMBH OF GERMANY, ASSET ACQUISITION





On
      July
      7, 2005, GlobeTel entered into a letter of intent to acquire the assets and
      operations of Altvater GmbH of Germany (Altvater). Subsequently, an agreement
      was signed, but the acquisition has not yet closed as of the date of this
      report. Altvater is a wireless communications systems integrator for HotZone
      systems in Europe, with core operations in Germany. Altvater GmbH has existing
      sales partner relationships in Europe and North Africa. On September 15, 2005,
      GlobeTel Wireless Corp., through the acquisition of Altvater, formed a new
      division, Total investment by Globetel Wireless Corp was $291,476 as of December
      31, 2005. GlobeTel Wireless Europe GmbH financial statements, as of December
      31,
      2005 have been included in the consolidated results of the Company's
      operations.





GLOBETEL
      WIRELESS, GERMANY CONTRACT





The
      Company, through GlobeTel Wireless, is utilizing the HotZone assets and
      technology in developing WIMAX wireless systems for deployment in areas the
      Company identifies and markets to. Future considerations include the use of
      the
      Company's Stratellites(TM), which will provide radio technology for the wireless
      communications that will cover significant geographic areas up to 120,000 square
      miles, and, in addition, provide advanced wireless products and services for
      terrestrial wide area networks covering rural and city areas. Upon deployment
      of
      the Stratellite(TM), on a region-by-region and country-by-country basis the
      communications technology will deliver high speed voice, data and rich streaming
      content, as well as other communications possibilities. The Company has
      negotiated several contracts for the deployment of WIMAX wireless systems (See
      Globetel Wireless Germany Contract and Russian Joint Venture
      below).





COOPERATIVE
      RESEARCH AND DEVELOPMENT AGREEMENT





On
      July
      13, 2005, the Company announced that Sanswire Networks, LLC had signed a
      Cooperative Research and Development Agreement (CRDA) with Proton Energy
      Systems, Inc., a subsidiary of Distributed Energy Systems Corp. Pursuant to
      the
      agreement, Proton will provide assistance in developing a regenerative fuel
      cell
      energy storage system for our high altitude Remotely Operated Airship (ROA),
      or
      Stratellite. Under the agreement, Proton will provide prototype regenerative
      fuel cell (RFC) equipment and specialized technical support to Sanswire for
      our
      development and flight-testing of the Stratellite via a series of task
      agreements. Sanswire will provide the airship platform for testing and
      engineering inputs to tailor the RFC solution.





GLOBETEL
      WIRELESS, GERMANY CONTRACT





On
      August
      1, 2005, GlobeTel Wireless announced that it would install wireless networks
      in
      three German cities. GlobeTel Wireless will provide high-speed wireless networks
      for internet connectivity starting with the town of Kaiserslautern, and
      continuing with nearby communities. Kaiserslautern is a city of 100,000 people,
      located 100 miles South West of Frankfurt. Construction of the project is
      scheduled to begin in the 2nd quarter 2006. GlobeTel Wireless is installing
      these first Wireless Networks in Germany as part of the roll out plan to deploy
      wireless communication networks to non-DSL communities, in identified geographic
      markets.





During
      2005 and as of the date of this report, no transactions have occurred that
      would
      require recording or disclosure in the Company's financial statements related
      to
      this agreement.





SERVICES
      AGREEMENT - GLOBAL CROSSING, LTD. (NASDAQ: GLBC)





On
      October 6, 2005, Global Crossing announced that GlobeTel had selected its
      integrated, global IP-based network to offer international cable companies
      and
      Internet Service Providers ("ISPs") a completely customizable VoIP solution
      for
      clients located in Latin America and the Caribbean. As of the date of this
      report no transactions have occurred that would require recording or disclosure
      in the Company's financial statements.





COOPERATIVE
      TECHNOLOGIES AGREEMENT - UNIVERSITY OF STUTTGART, GERMANY





On
      October 12, 2005, the Company announced that Sanswire Networks LLC had signed
      an
      agreement with TAO-Technologies in cooperation with the University of Stuttgart
      in Germany. The agreement states that TAO-Technologies, in cooperation with
      the
      University of Stuttgart, will design several next-generation airships intended
      for multiple uses. As of the date of this report no transactions have occurred
      that would require recording or disclosure in the Company's financial
      statements.




57





GLOBETEL
      WIRELESS, RUSSIAN JOINT VENTURE AGREEMENT





As
      of
      December 30, 2005, GlobeTel Wireless Corp. ("GTEW") has entered into a binding
      agreement to install wireless communications networks in 30 cities throughout
      the Russian Federation, providing broadband, VOIP and DECt technologies. GTEW
      has entered into an agreement with LLC Internafta ("Internafta") of Moscow,
      Russia, whereby Internafta will pay to GTEW a series of four construction
      payments totaling US$600 million for the installation of an array of proprietary
      networks to be installed in Russia's 30 largest cities, starting with Moscow
      and
      St. Petersburg. GTEW will both manage the completed network and will retain
      an
      ongoing 50% shareholding in the operations of the network, allowing the Company
      to enjoy the significant benefits of the recurring revenue stream. GlobeTel
      plans to roll out the network in 3 stages, comprising 10 cities each, over
      the
      next 27 months.





On
      March
      2, 2006 the Company announced that Internafta had requested an additional delay
      in the closing of the funding until the week of March 6, 2006. The Company
      has
      provided Internafta and its banks with a significantly expanded business plan
      outlining, in detail, the company's program for equipment manufacturing,
      delivery, installation, testing, monitoring, staffing, progress payment
      requirements, and other pertinent information. Internafta advised the Company
      that its funding has been approved by its bank syndicate, subject only to the
      bank's final review and analysis of the business plan.





Internafta
      has informed GlobeTel that its bank recommends that smaller, more frequent,
      progress payments be established so that the necessary staged payments can
      be
      delivered to GlobeTel as and when the network is delivered and installed. These
      smaller, more frequent, staged payments do not reduce the total capital value
      of
      the agreement with GlobeTel Wireless or change any other terms of the agreement.
      GlobeTel will still receive $600 million for deployment of the network. The
      exact amount of the new proposed initial deposit, and the size and timing of
      the
      new proposed progress payments, will be discussed and agreed with GlobeTel
      once
      the bank has completed its due diligence and when the bank group formally
      accepts the terms of Internafta's proposed banking instrument.





On
      March
      17, 2006, the Company announced that based upon differences between the Company
      and Internafta on the financing process, the parties have agreed to revise
      their
      agreement to more accurately reflect the timing of payments GlobeTel expects
      to
      receive for the build out of the 30 city wireless network in Russia and allow
      Internafta additional time to begin making payments.





On
      April
      30, 2006 the Company notified Internafta that it was terminating the
      transaction.





During
      2005, and as of the date of this report, no transactions have occurred that
      would require recording or disclosure in the Company's financial statements
      related to this agreement.





AGREEMENT
      WITH FINANCIAL SOFTWARE & SYSTEMS IN INDIA





On
      November 9, 2005, the Company signed an agreement with Financial Software &
Systems (P) Ltd. ("FSS") based in Chennai, India. The purpose of the agreement
      is to establish a commercial relationship between GlobeTel and FSS that will
      enable the parties to work together to market stored value and money remittance
      programs, targeting tens of millions of existing banking customers in the $12
      billion Indian remittance market.





FSS
      focuses its business in Electronic Funds Transfer ("EFT") solutions and
      outsourced services which power the majority of ATMs and Point-of-Sale ("POS")
      terminals in India, controlling most of the Electronic Funds Transfers in the
      country. FSS also provides third-party processing as an outsourced application
      services for many of the largest banks in India.





The
      Company believes that its relationship with FSS will bring cutting edge
      technology solutions to banks and financial institutions in India and across
      the
      globe. FSS is leveraging its extensive domain knowledge in payment processing
      and transaction switching across various touch points with highly skilled
      software development and implementation resources, world-class IT
      infrastructure, and global partnerships.





The
      Company is currently in the process of establishing an Indian company and
      setting up the operations. As of the date of this report, no transactions have
      occurred that would require recording or disclosure in the Company's financial
      statements related to this agreement.





OTHER
      AGREEMENTS





Several
      other agreements, letters of intent, and memorandums of understanding regarding
      stored value cards and other telecommunications programs, as well as the
      Sanswire project, were entered into during 2005 and through the date of this
      report, none of which require the recording of any assets, liabilities, revenues
      or expenses.




58





**NOTE
      20 - COMMITMENTS AND CONTINGENCIES**





MEXICO
      ASSOCIATE AND CUSTOMER LITIGATION





The
      Company has a legal action against our associate and customer in Mexico for
      non-payment of the amount they owe the Company. This customer has substantial
      assets, including telecommunications equipment, existing working networks and
      Mexican tax refunds which they have proposed to turn over to the Company. The
      Company filed a motion in the Mexican courts which was necessary to formally
      request that the Company become the assigned payee of the tax refund receivable
      and formally secure the equipment and to take over the operations of the
      existing networks.





In
      February 2005, the customer agreed that proceeds from the network operations
      were to be paid totally to GlobeTel, including the customer's portion of the
      profit sharing, until the amount owed has been fully paid. Upon full payment,
      the Company will begin the sharing profits again in accordance with the
      contract.





The
      Company received a judgment on February 14, 2005 in the amount of $330,000.
      It
      is not certain of the amounts that, ultimately, will be realized from the Mexico
      associate.





This
      situation with our customer has caused us to record an allowance for bad debt
      expense for the fiscal year ending 2004 in the amount of $938,782 and record
      an
      allowance for bad debt expense for the fiscal year ending 2005 in the amount
      of
      $625,855 and an allowance for bad debt expense for the fiscal year ending 2005
      for a Mexican Tax Refund in the amount of $382,160.





FORMER
      CONSULTANTS LITIGATION





The
      Company is a defendant in two lawsuits filed by Matthew Milo and Joseph
      Quattrocchi, two former consultants, filed in the Supreme Court of the State
      of
      New York (Richmond County, Case no. 12119/00 and 12118/00). These matters were
      subsequently consolidated as a result of an Order of the court and now bear
      the
      singular index number 12118/00. The original lawsuits were for breach of
      contract. The complaint demands the delivery of 10,000,000 pre-split shares
      of
      ADGI stock to Milo and 10,000,000 to Quattrocchi. GlobeTel was entered into
      the
      action, as ADGI was the predecessor of the Company. The suit also requests
      an
      accounting for the sales generated by the consultants and attorneys fees and
      costs for the action.





The
      lawsuits relate to consulting services that were provided by Mr. Milo and Mr.
      Quattrocchi and a $50,000 loan advanced by these individuals, dated May 14,
      1997, of which $35,000 had been repaid.





With
      regard to the issues related to original index number 12119/00, as a result
      of a
      summary judgment motion, the plaintiffs were granted a judgment in the sum
      of
      $15,000, which has since been paid. The rest of the plaintiff's motion was
      denied. The court did not order the delivery of 24,526,000 pre-split shares
      of
      ADGI common stock as the decision on that would be reserved to time of
      trial.





An
      Answer
      and Counterclaim had been interposed on both of these actions. The Answer denies
      many of the allegations in the complaint and is comprised of eleven affirmative
      defenses and five counterclaims alleging damages in the sum of $1,000,000.
      The
      counterclaims in various forms involve breach of contract and breach of
      fiduciary duty by the plaintiffs.





However,
      an outcome cannot be projected with any certainty. The Company has not entered
      into any settlement negotiations with Mr. Milo and Mr. Quattrocchi and does
      not
      believe that we will be materially adversely affected by the outcome of this
      proceeding.





Presently,
      the Company is continuing its defense and counterclaims in this matter. A jury
      was selected on March 3, 2006 in anticipation for a trial; however, the parties
      entered into an agreement to proceed before a Judicial Hearing Officer for
      a
      non-jury trial. This case is expected to be assigned to a Judicial Hearing
      Officer on or before March 31, 2006 and a new hearing date will be set at that
      time.





PATENT
      INFRINGEMENT LAWSUIT





A
      case
      was filed against the Company for patent infringement. On or about September
      1,
      2004, Alexsam, Inc. (Alexsam) filed an action for patent infringement against
      us
      alleging the stored value card and service the Company is planning to offer
      infringes one or more of U.S. Patent No. 6,000,608 (the 608 patent) and U.S.
      Patent No. 6,189,787 (the 787 patent), allegedly owned by Alexsam. The actions
      were filed in the United States District Court, Eastern District of Texas,
      styled Alexsam, Inc. vs. Datastream Card Svc., et al. Case Number 2:03-cv-337.
      On January 14, 2005, the court dismissed the lawsuit against the
      Company.




59





On
      February 8, 2005, we filed suit against Alexsam and Robert Dorf (collectively
      the defendants) in the United States District Court for the Southern District
      of
      Florida, Civil Action No. 05-60201, seeking a declaratory judgment from the
      court that the 608 and 787 patents are invalid, not enforceable and will not
      be
      infringed by our stored value card offering. We are also seeking recovery for
      damages brought on us by Alexsam, the owners of Alexsam and Dorf, for breach
      of
      confidential disclosure and trust, intentional interference with business
      advantage, and for unfair competition under Sec. 501.204 of the Florida
      Statutes.





We
      and
      Alexsam have subsequently settled our dispute. In exchange for granting a
      non-exclusive license to GlobeTel for the Patents, GlobeTel withdrew its motion
      for attorneys' fees in the Texas Lawsuit and dismissed the Florida Lawsuit.
      The
      License Agreement was made and entered into in September 2005. The license
      taken
      by us extends further to our customers, bank partners, third party financial
      processors and cardholders, and all those in privity with any of them, but
      only
      to the extent those entities' activities relate to us and its license.





SERVICE
      PROVIDER AGREEMENT - BRAZIL NETWORK





On
      March
      23, 2002, GlobeTel signed a memorandum of understanding with a company called
      Trans Global Ventures, Inc. (TGV), a company based in Miami, to form a joint
      venture to be registered as an LLC (Limited Liability Company) in the State
      of
      Florida to build out a VoIP network in Brazil offering call origination
      including but not limited to prepaid calling and 800 number calling as well
      as
      access to GlobeTel's Enhanced Services Platform technology. Initially, the
      venture was to be based on a 50/50 ownership between the two companies.
      Subsequently, the memorandum of understanding was modified to give GlobeTel
      80%
      ownership, a percentage determined based on the investments to be made by the
      Company in the venture. Ultimately, however, both companies determined that
      TGV
      acting as a service provider would best serve the needs of each company, and
      therefore both companies agreed to terminate the memorandum of understanding
      and
      accordingly, the LLC was never formed.





Under
      the
      service provider agreement, for service provided, TGV shall be entitled to
      receive 20% of the project income, defined as: the revenues from the Brazil
      network, less direct costs of sales for operating this network, less other
      costs
      allocated to this project (based on multiplying total operating expenses by
      the
      percentage of Brazil network sales to total Company revenues for the
      year).





In
      connection with the Brazilian network operations, the Company recognized
      revenues of $136,937, $2,147,119 and $2,923,981 for years ended December 31,
      2005, 2004 and 2003, respectively. The cost of sales, substantially all of
      which
      was paid directly to third-party suppliers, was $165,205, $1,996,635 and
      $1,993,737, respectively, in 2005, 2004 and 2003.





In
      June
      2005, the Company and TGV discontinued the network operations and do not intend
      to recommence such operations in the near term.





SERVICE
      PROVIDER AGREEMENT - MEXICO NETWORK





On
      June
      26, 2002, GlobeTel signed a memorandum of understanding with Qualnet Telecom,
      LLC for a joint venture to be known as GlobeTel Qualnet LLC, to be registered
      as
      an LLC (Limited Liability Company) in the State of Florida. The purpose of
      the
      venture was to build out a VoIP network in Mexico for call termination
      throughout the country that will have initial capacity to transport 8 million
      minutes per month. Qualnet had been operating in Mexico for several years and
      had contracts with various Mexican telecom companies. GlobeTel's role in the
      agreement was to provide financing and equipment to build the network. The
      agreement was for GlobeTel to have 80% ownership of the venture and Qualnet
      20%,
      and accordingly GlobeTel committed 80% of the funding of the venture in the
      form
      of working capital, equipment and guarantees for the issuance of letters of
      credit as required by the Mexican telecom companies. Since Qualnet already
      had
      points of presence in several cities in Mexico had an established customer
      base,
      installation of the equipment and ramping up of the traffic required
      substantially less time than if the network was to be built from the ground
      up.
      As a result, the venture was able to operate within several weeks and was able
      to fill the network near capacity.





The
      network continued to operate at capacity throughout the year and it was
      subsequently determined that each party would be better served by continuing
      to
      do business with Qualnet as a service provider. Both parties agreed not to
      proceed with the joint venture, and accordingly, the LLC was never formed and
      the parties signed an agreement not to pursue the joint venture agreement as
      contemplate in the memorandum of agreement dated June 26 2002. Under the service
      provider agreement, for services provided, Qualnet shall be entitled to receive
      20% of the project income, defined as: the revenues from the Mexico network,
      less direct costs of sales for operating this network, less other costs
      allocated to this project (based on multiplying total operating expenses by
      the
      percentage of Mexico network sales to total Company revenues for the
      year).




60





The
      Company recognized revenues of $4,774,657 and $8,052,143, respectively, for
      the
      years ended December 31, 2004 and 2003. The cost of sales substantially all
      of
      which was paid directly to third-party suppliers were $4,556,912 in 2004 and
      $6,159,401 in 2003. There were no activities in connection with the Mexico
      network in 2005 and through the date of this report.





JOINT
      VENTURE AGREEMENT - TRUESPEED WIRELESS





On
      September 19, 2002, the Company entered into a joint venture agreement with
      TrueSpeed Wireless, Inc., a Nevada corporation based in Aliso Viejo, California.
      The venture is incorporated in Nevada as TrueSpeed Wireless International,
      Inc.
      and the structure of the joint venture is based on 50% ownership by GlobeTel
      and
      50% ownership by TrueSpeed Wireless, Inc. The purpose of the joint venture
      shall
      be for the deployment of the wireless technology services currently being
      deployed by TrueSpeed Wireless, Inc. and to market and distribute high-speed
      wireless data communications. The venture had not been able to secure contracts
      in targeted countries and as of December 2003, both companies agreed to dissolve
      the joint venture. No revenues or expenses were ever generated from the joint
      venture, nor were there any asset, liability, or equity transactions requiring
      recording in the financial statements during the existence of the joint
      venture.





LEASES
      AND RENTS




The
      Company leases office facilities at 9050 Pines Blvd., Suite 110, Pembroke Pines,
      Florida 33024, as of April 1, 2004. This lease will expire in June 2009, and
      has
      an initial monthly rent of $5,462 with increases of 4% per year.




In
      November 2004, the Company leased additional adjacent space at the Pembroke
      Pines, Florida location under the same terms and period as the existing lease,
      bring the total monthly rent to $9,186.




In
      June
      2005, we negotiated with the landlord to lease an additional 5,000 square feet
      office on the second floor of our present facility, 9050 Pines Blvd., Pembroke
      Pines, Florida 33024. The Company will begin occupancy of this office in April
      2006 and the lease expires in June 2009 with a monthly rent of $9,186 (including
      sales tax). GlobeTel vacated the premises in March 2006, having turned over
      the
      space to Gotham Financial as part of the sale of the Magic Money division to
      Gotham.




GlobeTel’s
      corporate offices are not located at 101 NE 3 rd Ave.,
      Suite 1500, Fort Lauderdale, FL 33301. Base rent is $13,000 per month plus
      the
      cost of services used by GlobeTel. The lease is for a period of 6 months.




GlobeTel
      formerly leased facilities at 444 Brickell Avenue, Suite 522, Miami, Florida
      33131. The Company was under a five-year lease expiring April 2005, with a
      monthly rent of $3,463. In January of 2005 the Company satisfied its lease
      obligation related to this office.




In
      January 2005, GlobeTel signed a lease agreement with the San Bernardino
      International Airport Authority for hangar space at the airport in San
      Bernardino, California for the purpose of assembling and storing the Stratellite
      prototype. The term of the agreement is from January 15, 2005 through March
      31,
      2005, at a monthly lease rate of $9,767. Three months prepaid rent totaling
      $29,302 was paid in December 2004. The agreement provides that with the consent
      of the lessor we may remain on a month-to-month basis, and we do intend to
      remain in the space for the near term.




Sanswire
      Technologies, Inc., the company from which we purchased Sanswire, LLC, had
      an
      office space lease in Dekalb County, Georgia. The lease term was from April
      1,
      2004 through March 31, 2005, with monthly rent of $2,628. Although not directly
      obligated on this lease, the Company paid the monthly rent from May 2004 through
      March 2005, whereas employees of our subsidiary, Sanswire, LLC, utilized the
      premises. The employees have since vacated the premises.




Effective
      November 2001, the Company signed a sub-lease agreement for the Jersey City
      facility with a customer/consultant of the Company. Pursuant to the sublease
      agreement, the customer/consultant has maintained the obligation of the monthly
      rent of $1,600, and at January 31, 2003, the lease expired and the Company
      has
      no further obligation to the lessee.





Future
      minimum rental payments required under the above operating leases subsequent
      to
      the year ended December 31, 2005 are as follows:





2006
            
            $
            515,0222007
            
            
            415,5202008
            
            
            427,4862009
            
            
            377,4542010
                and thereafter
            
            
            276,969$
            2,012,451




61




Rent
      expense for 2005, 2004 and 2003 were $480,995, $126,424 and $48,607,
      respectively.





**NOTE
      21 - RELATED PARTY TRANSACTIONS**





Related
      party transactions, other than those discussed in the notes above and below,
      include the following.





RELATED
      PARTY PAYABLES





As
      of
      December 31, 2005 and 2004, related party payables were $57,500 and $117,500,
      respectively. The balances represent short-term, non-interest bearing loans
      by
      officers of the Company, due on demand.





NOTES
      PAYABLE - STOCKHOLDER





As
      of
      December 31, 2002, the Company was obligated under a convertible promissory
      note
      payable to a stockholder and former director for $55,000, principally
      representing advances to the Company. In 2003, the Company issued 266,667 (4
      million pre-split) shares in complete settlement of the balance due.





SETTLEMENT
      WITH FORMER OFFICER AND DIRECTOR





In
      September 2005, the Company issued a total of 82,887 (1,243,305 pre-split)
      shares pursuant to a severance agreement with Leigh Coleman, a former President
      and Director, valued at $123,750, based on the closing price of the shares
      on
      the dates of issuance. In addition, a total of 81,481 options to purchase common
      shares, valued at $55,000 based on the option exercise price (adjusted for
      1:15
      reverse stock split) per the 2004 Employee Stock Bonus Plan.





LOSS
      ON
      SETTLEMENT WITH FORMER AFFILIATE





In
      September 2005, the Company entered into a settlement agreement with Sky China,
      Ltd., an Australian company that Mr. Coleman is affiliated with. Mr. Coleman
      was
      a former President and member of the Board of Directors for Globetel. The
      Company and Sky China, Ltd. entered into an agreement in 2004 to joint venture
      with the company for telecommunications services in Australia and Asia, and,
      in
      2004, issued 200,000 (3 million pre-split) shares of common stock valued at
      $135,000. Pursuant to the settlement, the Company granted Sky China Ltd. options
      to acquire 1,543,176 (post-split) shares valued at $1,256,873, based on $0.8150
      per share, the intrinsic value of the option share on the date of the
      agreement.





**NOTE
      22 - NET GAINS ON SETTLEMENT OF LIABILITIES AND DISCONTINUED
      OPERATIONS**





During
      the years ended December 31, 2004 and 2003 the Company recorded net gains on
      settlement of debts totaling $268,397and $26,274, respectively, as discussed
      below. There were no similar material transactions recorded in 2005.




EQUIPMENT
      VENDOR





At
      December 2003, the Company settled with one its vendors to pay a lesser amount
      for the purchase of equipment that ultimately did not function as purported.
      Likewise, the Company wrote off other long-term outstanding liabilities for
      purchase of equipment that also did not function properly. The settlement and
      write-off resulted in a gain of $26,274 in 2003.





ACCOUNTS
      PAYABLE





During
      2004, the Company had included in accounts payable certain disputed amounts
      payable to creditors totaling $14,823. The Company does not believe it has
      obligations to pay the recorded balances, and the vendors have not sought
      collection from the Company for over one year, and, accordingly, recognized
      a
      gain in 2004.





PROFESSIONAL
      SERVICES PROVIDER AND NOTE HOLDER





In
      addition, the Company has recorded accounts payables to a former provider of
      professional services totaling $333,060 and a note payable of $50,000 to an
      individual, a principal of the professional services firm. The Company entered
      into an arrangement with the parties, which states that upon payment of a total
      of $200,000, all of which was paid prior to December 31, 2004, the remaining
      balance of the above obligations referred to above will be considered fully
      satisfied without the necessity of further payments. The balance of $183,060
      was
      written off and a gain recorded in 2004 whereas the amounts due under the
      settlement are paid in full and all conditions fulfilled.




62


CAPITAL
      LEASE OBLIGATIONS





As
      of
      December 31, 2003, the Company had a balance due of $53,311 of principal on
      capital lease obligation and $15,924 in accrued interest. The equipment securing
      the obligation was abandoned prior to the 2003, after the lessee's refusal
      to
      accept return of the equipment in settlement of the obligation. The Company
      does
      not believe it has an obligation to repay the recorded balance, and neither
      the
      original lessee nor assigns have sought collection from the Company for over
      one
      year, and, accordingly the Company has recorded a gain of $69,235 in
      2004.





FORMER
      EMPLOYEES OF DISCONTINUED OPERATING DIVISION





In
      June
      2003, the Company ceased operations of its St. Louis, Missouri office. As part
      of the termination agreement with the employees of the St. Louis office, the
      employees were authorized to maintain and service the existing clients and
      keep
      the property and equipment of that office. The Company agreed to return the
      customer deposits made by the St. Louis clients. The Company recorded a gain
      of
      $55,842 in 2003 in connection with these transactions, based on the excess
      of
      the liabilities extinguished over the assets given up by the
      Company.





Three
      terminated employees were issued a total of 80,000 (1.2 million pre-split)
      free-trading shares of the Company's stock as severance pay. The Company charged
      $36,000 to expense in 2003 based on an amount equal to the average bid and
      asked
      price of the Company's shares on the date of issuance. The Company had a
      recorded balance due of $16,279 to terminated employees. However, during the
      three months ended September 30, 2005, the Company determined, and the former
      employees agreed, that any and all amounts due to or payable on behalf of the
      employees had been satisfied and no additional amounts were owed.





FORMER
      CONSULTANTS





Certain
      former consultants of the Company were granted a judgment in the sum of $15,000,
      as described in Note 19 above. All disputed amounts allegedly payable to the
      consultants were written off and a gain was reported in prior periods. A loss
      on
      settlement of liabilities was recorded during 2005, for the $15,000 subsequently
      determined payable.





**NOTE
      23 - LOSS ON PROPERTY AND EQUIPMENT DISPOSITIONS**





As
      of
      September 30, 2004, the Company evaluated its property and equipment, including
      telecommunications equipment, located both within and outside of the United
      States, and office furniture and equipment ascribed to our various domestic
      office locations maintained from 2000 through September 30, 2004. Certain assets
      were abandoned, based on management's determination that such assets have no
      economic value, due to such factors as technological obsolescence,
      non-functioning of assets, lack of salvage in excess of costs to dispose, and
      non-recoverability of assets located in geographical markets and areas in which
      we are no longer active. During 2004 we recorded a loss on disposition of
      property and equipment of $56,804.





Similarly,
      in 2003, a loss of $42,301 was recorded in connection with abandoned obsolete
      equipment.





**NOTE
      24 - INCOME TAXES**





Deferred
      income taxes and benefits for 2005 and 2004 are provided for certain income
      and
      expenses, which are recognized in different periods for tax and financial
      reporting purposes. The tax effects (computed at 15%) of these temporary
      differences and carry-forwards that give rise to significant portions of
      deferred tax assets and liabilities consist of the following:





**2004**
            
            **Current**
              **Period**
              **Changes**
            
            **2005**Deferred
                tax assets:Accrued
                officers’ compensation
            
            $
            29,750
            
            $
            1,171,384
            
            $
            1,201,134Allowance
                for doubtful accounts
            
            
            225,860
            
            
            (164,495
            )
            
            61,365Consulting
                services electedas
                start-up costs under IRC Sec. 195 (b)
            
            
            425,629
            
            
            844,499
            
            
            1,270,128Reincorporation
                expenses amortized under IRC Sec. 248
            
            
            25,975
            
            
            
            
            
            25,975Accumulated
                depreciation
            
            
            (240,023
            )
            
            193,743
            
            
            (46,280
            )Net
                operating loss carryforwards
            
            
            4,478,552
            
            
            4,539,781
            
            
            9,018,3334,945,743
            
            
            6,584,912
            
            
            11,530,655Valuation
                allowance
            
            
            (4,945,743
            )
            
            (6,584,912
            )
            
            (11,530,655
            )Net
                deferred tax asset
            
            $
            —
            
            $
            —
            
            $
            —





63




A
      reconciliation of income benefit provided at the federal statutory rate of
      15%
      to income tax benefit is as follows:


**2005**
              
              **2004**Income
                  tax benefit computed at federalstatutory
                  rate
              
              $
              (3,136,496
              )
              $
              (1,975,030
              )Accrued
                  salaries
              
              
              1,201,134
              
              
              29,750Allowance
                  for doubtful accounts
              
              
              61,365
              
              
              169,042Depreciation
              
              
              (10,269
              )
              
              (4,497
              )Losses
                  not benefited
              
              
              1,884,266
              
              
              1,780,735$
              —
              
              $
              —




The
      Company has accumulated net operating losses, which can be used to offset future
      earnings. Accordingly, no provision for income taxes is recorded in the
      financial statements. A deferred tax asset for the future benefits of net
      operating losses and other differences is offset by a 100% valuation allowance
      due to the uncertainty of the Company's ability to utilize the losses. These
      net
      operating losses begin to expire in the year 2021.





At
      the
      end of 2005, the Company had net operating loss carry-forwards (including those
      of its successor due to accounting for the reincorporation as an "F"
      reorganization under the Internal Revenue Code) of approximately $60,122,222,
      which expire at various dates through 2021.





**NOTE
      25 - COMMON STOCK TRANSACTIONS**





During
      the year ended December 31, 2003, the Company issued the following shares of
      Common stock, all of which shares are stated in pre-split amounts:





**Date
                Issued**
            
            **Shares**
            
            **Consideration**
            
            **Valuation**
            
            **Relationship**March
                14, 2003
            
            
            2,200,000
            
            
            Consulting
                services
            
            $
            22,000
            
            
            ConsultantMarch
                14, 2003
            
            
            1,800,000
            
            
            Investment
                banking
            
            
            18,000
            
            
            ConsultantMay
                7, 2003
            
            
            1,100,000
            
            
            Consulting
                services
            
            
            11,550
            
            
            ConsultantMay
                7, 2003
            
            
            900,000
            
            
            Investment
                banking
            
            
            9,450
            
            
            ConsultantMay
                22, 2003
            
            
            2,500,000
            
            
            Loan
                Collateral
            
            
            —
            
            
            Note
                HolderMay
                22, 2003
            
            
            2,500,000
            
            
            Loan
                Collateral
            
            
            —
            
            
            Note
                HolderMay
                22, 2003
            
            
            15,000,000
            
            
            Conversion
                of debt
            
            
            239,206
            
            
            InvestorMay
                29, 2003
            
            
            4,000,000
            
            
            Satisfaction
                of debt
            
            
            55,000
            
            
            Shareholder/Former
                DirectorJuly
                18, 2003
            
            
            200,000
            
            
            Severance
                pay
            
            
            6,000
            
            
            EmployeeJuly
                18, 2003
            
            
            500,000
            
            
            Severance
                pay
            
            
            15,000
            
            
            EmployeeJuly
                18, 2003
            
            
            500,000
            
            
            Severance
                pay
            
            
            15,000
            
            
            EmployeeJuly
                18, 2003
            
            
            450,000
            
            
            Legal
                services
            
            
            13,500
            
            
            Legal
                counsel/ former corporate secretaryJuly
                18, 2003
            
            
            800,000
            
            
            Consulting
                services
            
            
            24,000
            
            
            Consultant/EmployeeJuly
                18, 2003
            
            
            12,844,000
            
            
            Conversion
                of debt
            
            
            256,880
            
            
            InvestorAugust
                5, 2003
            
            
            20,080,321
            
            
            Sale
                of stock
            
            
            500,000
            
            
            Investor/ConsultantAugust
                5, 2003
            
            
            —
            
            
            Marketing
                services
            
            
            100,402
            
            
            InvestorAugust
                8, 2003
            
            
            3,400,000
            
            
            Consulting
                services
            
            
            102,000
            
            
            ConsultantAugust
                28, 2003
            
            
            (42,916,666
            )
            
            Return
                of shares issued
            
            
            —
            
            
            NoteAugust
                28, 2003
            
            
            —
            
            
            Conversion
                of debt
            
            
            125,000
            
            
            InvestorAugust
                28, 2003
            
            
            —
            
            
            Conversion
                of debt
            
            
            250,000
            
            
            Investor
                / consultantAugust
                28, 2003
            
            
            —
            
            
            Conversion
                of debt
            
            
            125,000
            
            
            InvestorAugust
                28, 2003
            
            
            —
            
            
            Conversion
                of debt
            
            
            250,000
            
            
            InvestorSeptember
                3, 2003
            
            
            944,444
            
            
            Consulting
                services
            
            
            11,806
            
            
            ConsultantSeptember
                3, 2003
            
            
            900,000
            
            
            Consulting
                services
            
            
            11,250
            
            
            ConsultantSeptember
                3, 2003
            
            
            1,100,000
            
            
            Consulting
                services
            
            
            13,750
            
            
            ConsultantSeptember
                3, 2003
            
            
            3,847,222
            
            
            Consulting
                services
            
            
            49,090
            
            
            ConsultantSeptember
                29, 2003
            
            
            656,687
            
            
            Consulting
                services
            
            
            8,211
            
            
            ConsultantOctober
                9, 2003
            
            
            4,281,333
            
            
            Additional
                shares dueFor
                Conversion of debt
            
            
            —
            
            
            InvestorOctober
                9, 2003
            
            
            3,650,000
            
            
            Consulting
                services
            
            
            73,000
            
            
            Consultant/employeOctober
                9, 2003
            
            
            2,000,000
            
            
            Officer's
                salary
            
            
            40,000
            
            
            Chief
                FinancialOfficerDecember
                31, 2003
            
            
            7,500,000
            
            
            Officer's
                salary
            
            
            112,500
            
            
            Chief
                ExecutiveOfficerDecember
                31, 2003
            
            
            1,166,667
            
            
            Officer's
                salary
            
            
            17,500
            
            
            Chief
                FinancialOfficerDecember
                31, 2003
            
            
            (4,000,000
            )
            
            Return
                of shares issuedfor
                loan collateral
            
            
            —
            
            
            Note
                Holder




64




During
      the year ended December 31, 2004, the Company issued the following shares of
      Common stock, all of which shares are stated in pre-split amounts:


**Date
                  Issued**
              
              **Shares**
              
              **Consideration**
              
              **Valuation**
              
              **Relationship**January
                  15, 2004
              
              
              4,500,000
              
              
              Exercised
                  Stock Options
              
              $
              —
              
              
              Chief
                  Executive Officer /DirectorJanuary
                  15, 2004
              
              
              5,166,666
              
              
              Exercised
                  Stock Options
              
              
              —
              
              
              Chief
                  Financial OfficerJanuary
                  15, 2004
              
              
              2,000,000
              
              
              Exercised
                  Stock Options
              
              
              —
              
              
              Director/Former
                  PresidentJanuary
                  15, 2004
              
              
              9,000,000
              
              
              Exercised
                  Stock Options
              
              
              —
              
              
              Chief
                  Operating Officer/ DirectorJanuary
                  15, 2004
              
              
              1,000,000
              
              
              Exercised
                  Stock Options
              
              
              —
              
              
              President/Director
                  /Former ConsultantJanuary
                  15, 2004
              
              
              2,666,667
              
              
              Exercised
                  Stock Options
              
              
              —
              
              
              VendorFebruary
                  3, 2004
              
              
              3,202,180
              
              
              Exercised
                  Stock Options
              
              
              —
              
              
              Chief
                  Executive Officer/DirectorFebruary
                  3, 2004
              
              
              1,243,847
              
              
              Exercised
                  Stock Options
              
              
              —
              
              
              Chief
                  Financial OfficerFebruary
                  3, 2004
              
              
              2,003,106
              
              
              Exercised
                  Stock Options
              
              
              —
              
              
              Chief
                  Operating Officer/DirectorFebruary
                  3, 2004
              
              
              6,410,513
              
              
              Exercised
                  Stock Options
              
              
              —
              
              
              EmployeeFebruary
                  3, 2004
              
              
              1,458,333
              
              
              Exercised
                  Stock Options
              
              
              —
              
              
              AccountantFebruary
                  4, 2004
              
              
              20,796,483
              
              
              Exercised
                  Stock Options
              
              
              —
              
              
              Director/Former
                  PresidentFebruary
                  4, 2004
              
              
              16,500,000
              
              
              Investment
                  in Unconsolidated Foreign Subsidiary
              
              
              —
              
              
              InvesteeFebruary
                  5, 2004
              
              
              3,500,000
              
              
              Investment
                  in Unconsolidated Foreign Subsidiary
              
              
              —
              
              
              Creditor
                  ofFebruary
                  17, 2004
              
              
              9,100,000
              
              
              Consulting
                  Services
              
              
              425,000
              
              
              Director
                  (COB)/ Former ConsultantMay
                  11, 2004
              
              
              108,333
              
              
              Marketing
                  Services
              
              
              6,500
              
              
              ConsultantMay
                  12, 2004
              
              
              28,000,000
              
              
              Sanswire
                  Assets Acquisition
              
              
              2,800,000
              
              
              Shareholders
                  of Selling CorporationMay
                  25, 2004
              
              
              1,352,528
              
              
              Investment
                  Banking Fees
              
              
              67,626
              
              
              Investment
                  BankerMay
                  25, 2004
              
              
              676,264
              
              
              Investment
                  Banking Fees
              
              
              33,813
              
              
              Investment
                  BankerMay
                  25, 2004
              
              
              1,352,528
              
              
              Investment
                  Banking Fees
              
              
              67,626
              
              
              Investment
                  BankerJuly
                  29, 2004
              
              
              1,500,000
              
              
              Compensation
              
              
              144,000
              
              
              EmployeeJuly
                  29, 2004
              
              
              500,000
              
              
              Compensation
              
              
              48,000
              
              
              EmployeeJuly
                  29, 2004
              
              
              500,000
              
              
              Compensation
              
              
              48,000
              
              
              EmployeeAugust
                  12, 2004
              
              
              2,000,000
              
              
              Consulting
                  Services
              
              
              192,000
              
              
              President/Former
                  Consultant (as Nominee)August
                  12, 2004
              
              
              2,000,000
              
              
              Consulting
                  Services
              
              
              192,000
              
              
              Chief
                  Technology Officer / Former Consultant (as Nominee)August
                  12, 2004
              
              
              175,000
              
              
              Compensation
              
              
              7,000
              
              
              EmployeeSept.
                  28, 2004
              
              
              2,000,000
              
              
              Stratodyne
                  Assets Acquisition
              
              
              —
              
              
              Shareholder
                  of Corporation SellingNovember
                  4, 2004
              
              
              7,800,000
              
              
              Convert
                  Pfd. Ser. A (received as broker fee).
              
              
              —
              
              
              Preferred
                  Series-A Shareholder/ Investment BankerNovember
                  4, 2004
              
              
              5,200,000
              
              
              Convert
                  Pfd. Ser. A
              
              
              —
              
              
              Preferred
                  Series-A ShareholdersNovember
                  17, 2004
              
              
              26,000,000
              
              
              Convert
                  Pfd. Ser. A
              
              
              —
              
              
              Preferred
                  Series-A Shareholder/ Investment BankerNovember
                  17, 2004
              
              
              20,800,000
              
              
              Convert
                  Pfd. Ser. A
              
              
              —
              
              
              Preferred
                  Series-A ShareholdersNovember
                  17, 2004
              
              
              10,920,000
              
              
              Convert
                  Pfd. Ser. A
              
              
              157,500
              
              
              Preferred
                  Series-A ShareholdersNovember
                  18, 2004
              
              
              1,560,000
              
              
              Convert
                  Pfd. Ser. A
              
              
              22,500
              
              
              Preferred
                  Series-A ShareholdersNovember
                  19, 2004
              
              
              9,360,000
              
              
              Convert
                  Pfd. Ser. A
              
              
              135,000
              
              
              Preferred
                  Series- A ShareholdersNovember
                  23, 2004
              
              
              7,800,000
              
              
              Convert
                  Pfd. Ser. A
              
              
              112,500
              
              
              Preferred
                  Series- A ShareholdersNovember
                  24, 2004
              
              
              1,560,000
              
              
              Convert
                  Pfd. Ser. A
              
              
              22,500
              
              
              Preferred
                  Series-A ShareholdersNovember
                  30, 2004
              
              
              9,360,000
              
              
              Convert
                  Pfd. Ser. A
              
              
              135,000
              
              
              Preferred
                  Series-A ShareholdersDecember
                  1, 2004
              
              
              31,200,000
              
              
              Convert
                  Pfd. Ser. A
              
              
              450,000
              
              
              Preferred
                  Series-A ShareholdersDecember
                  3, 2004
              
              
              1,560,000
              
              
              Convert
                  Pfd. Ser. A
              
              
              22,500
              
              
              Preferred
                  Series-A ShareholdersDecember
                  8, 2004
              
              
              6,240,000
              
              
              Convert
                  Pfd. Ser. A
              
              
              90,000
              
              
              Preferred
                  Series-A ShareholdersDecember
                  10, 2004
              
              
              12,480,000
              
              
              Convert
                  Pfd. Ser. A
              
              
              180,000
              
              
              Preferred
                  Series-A ShareholdersDecember
                  28, 2004
              
              
              6,240,000
              
              
              Convert
                  Pfd. Ser. A
              
              
              90,000
              
              
              Preferred
                  Series-A ShareholdersDecember
                  30, 2004
              
              
              1,560,000
              
              
              Convert
                  Pfd. Ser. A
              
              
              22,500
              
              
              Preferred
                  Series-A ShareholdersDecember
                  31, 2004
              
              
              (28,000,000
              )
              
              Return
                  of shares originally issued for Sanswire and Stratodyne
                  Assets
              
              
              (2,800,000
              )
              
              Shareholders
                  of Selling CorporationsDecember
                  31, 2004
              
              
              26,000,000
              
              
              Reissuance
                  of shares For Sanswire Assets
              
              
              2,600,000
              
              
              Shareholders
                  of Selling CorporationDecember
                  31, 2004
              
              
              2,000,000
              
              
              Reissuance
                  of shares for Stratodyne Assets
              
              
              200,000
              
              
              Shareholder
                  of Selling CorporationDecember
                  31, 2004
              
              
              3,000,000
              
              
              Consulting
                  Services
              
              
              135,000
              
              
              ConsultantDecember
                  31, 2004
              
              
              3,000,000
              
              
              Consulting
                  Services
              
              
              135,000
              
              
              ConsultantDecember
                  31, 2004
              
              
              500,000
              
              
              Consulting
                  Services
              
              
              22,500
              
              
              ConsultantDecember
                  31, 2004
              
              
              500,000
              
              
              Consulting
                  Services
              
              
              22,500
              
              
              Consultant




65




During
      the year ended December 31, 2005, the Company issued the following shares of
      Common stock, all of which shares are stated in post-split amounts:





**DATE
                ISSUED**
            
            **SHARES**
            
            **CONSIDERATION**
            
            **VALUATION**
            
            **RELATIONSHIP**2/9/2005
            
            
            208,000
            
            
            Converted
                Preferred
              Series
                A
            
            $
            36,000
            
            
            Preferred
                Series-A Shareholders2/14/2005
            
            
            520,000
            
            
            Converted
                Preferred
              Series
                A
            
            $
            90,000
            
            
            Preferred
                Series-A Shareholders2/18/2005
            
            
            84,500
            
            
            Converted
                Preferred Series A Received as Broker Fee
            
            
            *
            
            
            Broker
                / Preferred Series-A Shareholders




66




2/24/2005
            
            
            251,421
            
            
            Converted
                Notes Payable and Accrued Interest
            
            $
            301,706
            
            
            Convertible
                Note Holder2/24/2005
            
            
            471,415
            
            
            Converted
                Notes Payable and Accrued Interest
            
            $
            565,698
            
            
            Convertible
                Note Holder2/24/2005
            
            
            157,138
            
            
            Converted
                Notes Payable and Accrued Interest
            
            $
            188,566
            
            
            Convertible
                Note Holder2/24/2005
            
            
            33,333
            
            
            Broker
                Fee
            
            
            *
            
            
            Broker
                / Preferred Series-A Shareholders2/24/2005
            
            
            625,000
            
            
            Convert
                Note Payable and Accrued Interest
            
            $
            750,000
            
            
            Convertible
                Note Holder2/25/2005
            
            
            1,575,833
            
            
            Converted
                Preferred Series A Received as Broker Fee
            
            
            *
            
            
            Broker
                / Preferred Series-A Shareholders2/25/2005
            
            
            33,333
            
            
            Broker
                Fee
            
            
            *
            
            
            Broker
                / Convertible Note Holder3/3/2005
            
            
            1,040,000
            
            
            Converted
                Preferred Series A
            
            
            180,000
            
            
            Preferred
                Series-A Shareholders3/3/2005
            
            
            33,333
            
            
            Exercised
                Warrants
            
            
            61,325
            
            
            Broker
                / Convertible Note Holder3/3/2005
            
            
            260,417
            
            
            Exercised
                Warrants
            
            
            429,688
            
            
            Convertible
                Note Holder turned Stockholder3/3/2005
            
            
            86,806
            
            
            Exercised
                Warrants
            
            
            143,229
            
            
            Convertible
                Note Holder turned Stockholder3/3/2005
            
            
            138,889
            
            
            Exercised
                Warrants
            
            
            229,165
            
            
            Convertible
                Note Holder turned Stockholder3/6/2005
            
            
            80,555
            
            
            Exercised
                Warrants
            
            
            132,916
            
            
            Convertible
                Note Holder turned Stockholder3/7/2005
            
            
            485,333
            
            
            Converted
                Preferred Series A Received as Broker Fee
            
            
            *
            
            
            Preferred
                Series-A Shareholders3/7/2005
            
            
            -
            
            
            Converted
                Preferred Series A Additional Proceeds
            
            $
            9,000
            
            
            Preferred
                Series-A Shareholders3/7/2005
            
            
            66,667
            
            
            Exercised
                Warrants
            
            $
            110,000
            
            
            Convertible
                Note Holder turned Stockholder3/10/2005
            
            
            66,667
            
            
            Exercised
                Warrants
            
            $
            110,000
            
            
            Convertible
                Note Holder turned Stockholder3/11/2005
            
            
            80,000
            
            
            Consulting
                Services
            
            $
            358,200
            
            
            Consultant
                / Legal Counsel3/11/2005
            
            
            80,000
            
            
            Consulting
                Services
            
            $
            358,200
            
            
            Former
                Consultant / Current Executive Vice President3/11/2005
            
            
            200,000
            
            
            Costs
                of Sales
            
            $
            450,000
            
            
            Vendor3/14/2005
            
            
            66,667
            
            
            Exercised
                Warrants
            
            $
            110,000
            
            
            Convertible
                Note Holder turned Stockholder3/14/2005
            
            
            500,000
            
            
            Exercised
                Stock Options
            
            
            *
            
            
            CEO3/14/2005
            
            
            280,216
            
            
            Exercised
                Stock Options
            
            
            *
            
            
            CFO3/21/2005
            
            
            369,022
            
            
            Exercised
                Stock Options
            
            
            *
            
            
            COO3/21/2005
            
            
            172,065
            
            
            Exercised
                Stock Options
            
            
            *
            
            
            Former
                Director3/21/2005
            
            
            100,000
            
            
            Exercised
                Stock Options
            
            
            *
            
            
            Employee3/22/2005
            
            
            37,832
            
            
            Exercised
                Stock Options
            
            
            *
            
            
            Employee3/22/2005
            
            
            10,378
            
            
            Exercised
                Stock Options
            
            
            *
            
            
            Employee3/22/2005
            
            
            8,211
            
            
            Exercised
                Stock Options
            
            
            *
            
            
            Employee3/22/2005
            
            
            7,738
            
            
            Exercised
                Stock Options
            
            
            *
            
            
            Employee3/22/2005
            
            
            6,388
            
            
            Exercised
                Stock Options
            
            
            *
            
            
            Employee3/22/2005
            
            
            8,097
            
            
            Exercised
                Stock Options
            
            
            *
            
            
            Employee3/22/2005
            
            
            1,363
            
            
            Exercised
                Stock Options
            
            
            *
            
            
            Employee3/22/2005
            
            
            945
            
            
            Exercised
                Stock Options
            
            
            *
            
            
            Employee3/22/2005
            
            
            1,052
            
            
            Exercised
                Stock Options
            
            
            *
            
            
            Employee3/22/2005
            
            
            310
            
            
            Exercised
                Stock Options
            
            
            *
            
            
            Employee3/28/2005
            
            
            211,734
            
            
            Exercised
                Stock Options
            
            
            *
            
            
            Employee




67




4/6/2005
            
            
            -
            
            
            Exercise
                Warrants - Additional Proceeds
            
            $
            1,347,500
            
            
            Convertible
                Note Holder turned Stockholder4/12/2005
            
            
            33,333
            
            
            Exercise
                Warrants
            
            $
            61,325
            
            
            Convertible
                Note Holder turned Stockholder4/15/2005
            
            
            8,892
            
            
            Exercised
                Stock Options
            
            
            *
            
            
            Employee4/15/2005
            
            
            8,527
            
            
            Exercised
                Stock Options
            
            
            *
            
            
            Employee4/15/2005
            
            
            8,715
            
            
            Exercised
                Stock Options
            
            
            *
            
            
            Director4/15/2005
            
            
            5,790
            
            
            Exercised
                Stock Options
            
            
            *
            
            
            Employee4/15/2005
            
            
            6,151
            
            
            Exercised
                Stock Options
            
            
            *
            
            
            Employee4/27/2005
            
            
            12,897
            
            
            Exercised
                Stock Options
            
            
            *
            
            
            Senior
                Vice President5/4/2005
            
            
            174,790
            
            
            Additional
                Shares Issued Per Anti-dilutive Agreement
            
            
            *
            
            
            Convertible
                Note Holder turned Stockholder5/6/2005
            
            
            291,317
            
            
            Additional
                Shares Issued Per Anti-dilutive Agreement
            
            
            *
            
            
            Convertible
                Note Holder turned Stockholder5/12/2005
            
            
            103,950
            
            
            Stock
                for Cash
            
            $
            300,000
            
            
            Investors5/12/2005
            
            
            346,500
            
            
            Stock
                for Cash
            
            $
            1,000,000
            
            
            Investors5/12/2005
            
            
            86,667
            
            
            Stock
                for Cash
            
            $
            250,120
            
            
            Investors5/12/2005
            
            
            86,667
            
            
            Stock
                for Cash
            
            $
            250,120
            
            
            Investors5/12/2005
            
            
            17,325
            
            
            Stock
                for Cash
            
            $
            50,000
            
            
            Investors5/12/2005
            
            
            86,625
            
            
            Stock
                for Cash
            
            $
            250,000
            
            
            Investors5/12/2005
            
            
            6,930
            
            
            Stock
                for Cash
            
            $
            20,000
            
            
            Investors5/12/2005
            
            
            27,720
            
            
            Stock
                for Cash
            
            $
            80,000
            
            
            Investors5/12/2005
            
            
            3,333
            
            
            Stock
                for Cash
            
            $
            9,620
            
            
            Investors5/12/2005
            
            
            3,333
            
            
            Stock
                for Cash
            
            $
            9,620
            
            
            Investors5/12/2005
            
            
            34,650
            
            
            Stock
                for Cash
            
            $
            100,000
            
            
            Investors5/12/2005
            
            
            13,333
            
            
            Stock
                for Cash
            
            $
            38,480
            
            
            Investors5/17/2005
            
            
            650,000
            
            
            Converted
                Preferred Series A
            
            $
            112,500
            
            
            Preferred
                Series-A Shareholders5/27/2005
            
            
            86,625
            
            
            Stock
                for Cash
            
            $
            250,000
            
            
            Investors5/27/2005
            
            
            250,000
            
            
            Consulting
                Services
            
            $
            905,000
            
            
            Former
                Consultant - Corporation owned by current Executive Vice
                President6/8/2005
            
            
            350,000
            
            
            Consulting
                Services
            
            $
            969,500
            
            
            Consultant
                / Legal Counsel6/13/2005
            
            
            22,500
            
            
            Shares
                received as Converted Preferred Series A
            
            
            *
            
            
            Broker/Preferred
                Series-A Shareholders6/13/2005
            
            
            2,444,167
            
            
            Converted
                Preferred Series A Received as Broker Fee
            
            
            *
            
            
            Broker/Preferred
                Series-A Shareholders6/14/2005
            
            
            4,353
            
            
            Exercised
                Stock Options
            
            
            *
            
            
            Employee6/27/2005
            
            
            33,334
            
            
            Sales
                Commissions
            
            $
            100,000
            
            
            Affiliate6/30/2005
            
            
            170,000
            
            
            Legal
                Services
            
            $
            493,000
            
            
            Consultant
                / Legal Counsel7/5/2005
            
            
            14,815
            
            
            Exercised
                Stock Options
            
            
            *
            
            
            Consultant7/5/2005
            
            
            8,334
            
            
            Employment
                Signing Bonus
            
            $
            25,000
            
            
            Employee
                of Sanswire7/5/2005
            
            
            1,000
            
            
            Services
                - Performance Bonus
            
            $
            1,000
            
            
            Employee
                of Sanswire7/5/2005
            
            
            334
            
            
            Services
                - Performance Bonus
            
            $
            1,000
            
            
            Employee
                of Sanswire7/5/2005
            
            
            334
            
            
            Services
                - Performance Bonus
            
            $
            1,000
            
            
            Employee
                of Sanswire7/5/2005
            
            
            334
            
            
            Services
                - Performance Bonus
            
            $
            1,000
            
            
            Employee
                of Sanswire7/5/2005
            
            
            334
            
            
            Services
                - Performance Bonus
            
            $
            1,000
            
            
            Employee
                of Sanswire7/5/2005
            
            
            334
            
            
            Services
                - Performance Bonus
            
            $
            1,000
            
            
            Employee
                of Sanswire




68




7/5/2005
            
            
            334
            
            
            Services
                - Performance Bonus
            
            $
            1,000
            
            
            Employee
                of Sanswire7/5/2005
            
            
            334
            
            
            Services
                - Performance Bonus
            
            $
            1,000
            
            
            Employee
                of Sanswire7/5/2005
            
            
            334
            
            
            Services
                - Performance Bonus
            
            $
            1,000
            
            
            Employee
                of Sanswire7/5/2005
            
            
            334
            
            
            Services
                - Performance Bonus
            
            $
            1,000
            
            
            Employee
                of Sanswire7/5/2005
            
            
            334
            
            
            Services
                - Performance Bonus
            
            $
            1,000
            
            
            Employee
                of Sanswire7/5/2005
            
            
            334
            
            
            Services
                - Performance Bonus
            
            $
            1,000
            
            
            Employee
                of Sanswire7/5/2005
            
            
            334
            
            
            Services
                - Performance Bonus
            
            $
            1,000
            
            
            Employee
                of Sanswire8/5/2005
            
            
            20,001
            
            
            Sales
                Commissions
            
            $
            37,402
            
            
            Affiliate
                / Vendor8/5/2005
            
            
            13,333
            
            
            Sales
                Commissions
            
            $
            24,933
            
            
            Affiliate
                / Vendor9/6/2005
            
            
            38,730
            
            
            Equipment
                Purchase
            
            $
            58,206
            
            
            Affiliate
                / Vendor9/8/2005
            
            
            100,000
            
            
            Conversion
                of Preferred Series C to Common Stock
            
            $
            150,000
            
            
            Relation
                to Investment Banker / Consultant9/8/2005
            
            
            720,000
            
            
            Conversion
                of Preferred Series C to Common Stock
            
            $
            1,080,000
            
            
            Investment
                Banker / Consultant9/8/2005
            
            
            3,166
            
            
            Services
                - Performance Bonus
            
            $
            4,750
            
            
            Employee
                of Sanswire9/8/2005
            
            
            133,334
            
            
            Employment
                Signing Bonus
            
            $
            200,000
            
            
            Employee9/13/2005
            
            
            98,983
            
            
            Employment
                Severance Agreement
            
            $
            177,400
            
            
            Former
                Employee9/27/2005
            
            
            185,185
            
            
            Board
                Member Referral Fee
            
            $
            275,926
            
            
            Consultant
                Board Member9/30/2005
            
            
            1,881,317
            
            
            Converted
                Preferred Series A
            
            $
            270,000
            
            
            Preferred
                Series-A Shareholders9/30/2005
            
            
            36,667
            
            
            Officer
                Salary Adjustment
            
            $
            55,000
            
            
            Former
                President / Director9/30/2005
            
            
            33,611
            
            
            Officer
                Salary Adjustment
            
            $
            50,000
            
            
            Former
                President / Director9/30/2005
            
            
            12,500
            
            
            Director
                Fees
            
            $
            18,750
            
            
            Former
                President / Director10/7/2005
            
            
            350,000
            
            
            Consulting
                Services
            
            $
            458,500
            
            
            Corporation
                owned by Former Consultant / Ccurrent Executive Vice
                President11/2/2005
            
            
            28,201
            
            
            Exercised
                Stock Options
            
            $
            53,300
            
            
            Employee11/17/2005
            
            
            500,000
            
            
            Conversion
                of Preferred Series C
            
            $
            250,000
            
            
            Chief
                Operating Officer11/28/2005
            
            
            9,333
            
            
            Exercised
                Warrants
            
            $
            15,399
            
            
            Stockholder
                / Warrant Holder11/28/2005
            
            
            2,333
            
            
            Exercised
                Warrants
            
            $
            3,849
            
            
            Stockholder
                / Warrant Holder11/28/2005
            
            
            60,638
            
            
            Exercised
                Warrants
            
            $
            100,053
            
            
            Stockholder
                / Warrant Holder11/28/2005
            
            
            4,851
            
            
            Exercised
                Warrants
            
            $
            8,004
            
            
            Stockholder
                / Warrant Holder11/28/2005
            
            
            72,765
            
            
            Exercised
                Warrants
            
            $
            120,062
            
            
            Stockholder
                / Warrant Holder11/28/2005
            
            
            2,333
            
            
            Exercised
                Warrants
            
            $
            3,849
            
            
            Stockholder
                / Warrant Holder11/28/2005
            
            
            69,545
            
            
            Exercised
                Warrants
            
            $
            114,751
            
            
            Stockholder
                / Warrant Holder




69




11/29/2005
            
            
            72,766
            
            
            Exercised
                Warrants
            
            $
            120,064
            
            
            Stockholder
                / Warrant Holder11/30/2005
            
            
            19,404
            
            
            Exercised
                Warrants
            
            $
            32,017
            
            
            Stockholder
                / Warrant Holder12/1/2005
            
            
            242,550
            
            
            Exercised
                Warrants
            
            $
            400,208
            
            
            Stockholder
                / Warrant Holder12/2/2005
            
            
            24,255
            
            
            Exercised
                Warrants
            
            $
            40,021
            
            
            Stockholder
                / Warrant Holder12/2/2005
            
            
            60,667
            
            
            Exercised
                Warrants
            
            $
            100,101
            
            
            Stockholder
                / Warrant Holder12/5/2005
            
            
            60,667
            
            
            Exercised
                Warrants
            
            $
            100,101
            
            
            Stockholder
                / Warrant Holder12/8/2005
            
            
            1,857,350
            
            
            Conversion
                of Note Payable and Accrued Interest
            
            $
            3,064,628
            
            
            Convertible
                Note Holder turned Stockholder12/8/2005
            
            
            306,860
            
            
            Conversion
                of Note Payable and Accrued Interest
            
            $
            506,319
            
            
            Convertible
                Note Holder turned Stockholder12/16/2005
            
            
            100,000
            
            
            Exercised
                Warrants
            
            $
            250,000
            
            
            Stockholder
                / Warrant Holder12/19/2005
            
            
            100,000
            
            
            Exercised
                Warrants
            
            $
            250,000
            
            
            Stockholder
                / Warrant Holder12/21/2005
            
            
            72,727
            
            
            Exercised
                Warrants
            
            $
            181,818
            
            
            Stockholder
                / Warrant Holder12/22/2005
            
            
            81,168
            
            
            Travel
                Services
            
            $
            125,000
            
            
            Corporation
                owned by Former Consultant / Ccurrent Executive Vice
                President12/27/2005
            
            
            291,961
            
            
            Conversion
                of Note Payable and Accrued Interest
            
            $
            481,736
            
            
            Convertible
                Note Holder turned Stockholder12/27/2005
            
            
            21,429
            
            
            Officer
                Salary
            
            $
            60,000
            
            
            Chief
                Executive Officer / Director12/27/2005
            
            
            19,643
            
            
            Officer
                Salary
            
            $
            55,000
            
            
            Chief
                Financial Officer12/27/2005
            
            
            9,821
            
            
            Officer
                Salary
            
            $
            27,500
            
            
            Corp.
                Secretary / Director12/27/2005
            
            
            19,643
            
            
            Officer
                Salary
            
            $
            55,000
            
            
            Chief
                Operating Officer12/27/2005
            
            
            19,643
            
            
            Officer
                Salary
            
            $
            55,000
            
            
            Chief
                Technology Officer12/27/2005
            
            
            19,643
            
            
            Officer
                Salary
            
            $
            55,000
            
            
            Former
                Chief Operating Officer / Director12/27/2005
            
            
            9,821
            
            
            Officer
                Salary
            
            $
            27,500
            
            
            Senior
                Vice-President of Finance12/31/2005
            
            
            12,931,334
            
            
            Conversion
                of Preferred Series B
            
            $
            8,435,200
            
            
            Preferred
                Stockholder12/31/2005
            
            
            308,712
            
            
            Conversion
                of Note Payable and Accrued Interest
            
            $
            509,375
            
            
            Convertible
                Note Holder turned Stockholder





*
      The
      valuation amounts of the above common stock transactions are based on the
      amounts that common stock and related additional paid-capital were increased
      (decreased) upon recording of each transaction. For exercises of stock options,
      no values are indicated, whereas the options were valued and the additional
      paid-in capital account was increased upon the original issuance (grant) of
      the
      options and no additional charges were recorded upon exercise of the options.
      For conversions of preferred stock, the valuation indicated is the recorded
      amount of the preferred stock upon original issuance of the preferred shares,
      which amount was reclassified to common stock and related additional paid-in
      capital upon conversion. Where preferred stock was originally issued for
      broker's fees (instead of cash) and, accordingly, no monetary compensation
      was
      received or recorded by the Company for the preferred shares issued, the listed
      common stock valuation is also zero.





In
      connection with the above, for certain issuances of shares, Forms S-8 have
      been
      filed with the Securities and Exchange Commission relative to such issuances
      of
      stock. The shares issued were valued by the Company based upon the average
      bid
      and asked price of the shares on the date of issuance. The value of these shares
      was charged to expense unless they were in consideration for future services,
      in
      which case they were recorded as deferred consulting fees.




70


For
      other
      issuances of shares during the periods described above, the Company-issued
      restricted shares (Rule 144) of its common stock to consultants and officers
      for
      services to the Company. Through December 31, 2004, issuance of restricted
      shares (Rule 144) were valued, due to limitations in current marketability,
      by
      the Company based upon half of the average bid and asked price of the Company's
      shares on the date of issuance, unless the services provided were valued at
      another amount as agreed upon between the parties.





Effective
      January 1, 2005, the Company adopted the policy of valuing all shares of common
      stock issued in consideration for services at the closing price of the shares
      on
      the date of issuance or date of Board approval or agreement, if earlier,
      regardless of whether the shares are issued or restricted or free-trading,
      except for instances where the closing price is based on contractual
      agreements.





Shares
      issued (retired) for loan collateral were recorded at par value.





**NOTE
      26 - STOCK OPTIONS**





During
      the year ended December 31, 2003, the Company issued the following options
      to
      acquire Common stock, all of which share amounts below are
      pre-split:





**Date
                Issued**
            
            **Shares**
            
            **Consideration**
            
            **Valuation**
            
            **Relationship**September
                26, 2003
            
            2,206,667
            
            Satisfaction
                of debt
            
            33,100
            
            Former
                PresidentSeptember
                26, 2003
            
            17,600,000
            
            Accrued
                salary
            
            264,200
            
            Former
                PresidentSeptember
                26, 2003
            
            8,944,467
            
            Accrued
                salary
            
            134,167
            
            Chief
                Executive OfficerSeptember
                26, 2003
            
            7,444,467
            
            Accrued
                salary
            
            111,667
            
            Chief
                Operating OfficerSeptember
                26, 2003
            
            7,444,467
            
            Accrued
                salary
            
            111,667
            
            Chief
                Financial OfficerSeptember
                26, 2003
            
            4,111,133
            
            Accrued
                salary
            
            61,667
            
            ControllerDecember
                18, 2003
            
            6,666,667
            
            Officer
                salary
            
            100,000
            
            Former
                PresidentDecember
                18, 2003
            
            5,333,333
            
            Officer
                salary
            
            80,000
            
            Chief
                Operating OfficerDecember
                18, 2003
            
            3,333,333
            
            Salary
            
            50,000
            
            Former
                ControllerDecember
                18, 2003
            
            1,000,000
            
            Officer
                salary
            
            15,000
            
            PresidentDecember
                18, 2003
            
            1,666,667
            
            Accounting
                services
            
            25,000
            
            AccountantsDecember
                18, 2003
            
            2,666,667
            
            Network
                services
            
            40,000
            
            Vendor





According
      to option agreements in connection with the above shares, the option prices
      were
      the lower of $ .015 (pre-split) per share or one-half of the closing market
      price on the last reported sale or closing price on the date of the agreement.
      The above options were issued at $.015 (pre-split) per share.





The
      above
      option shares were issued in "cashless exercises". Accordingly, the option
      shares actually issued were reduced by the number of shares required to pay
      for
      the options as $ .015 (pre-split) per share.





All
      of
      the above stock options were subsequently exercised in January
      2004.




71





During
      the year ended December 31, 2004, the Company issued the following options
      to
      acquire Common stock, all of which share amounts below are
      pre-split:





**Date
                Issued**
            
            **Shares**
            
            **Consideration**
            
            **Valuation**
            
            **Relationship**December
                31, 2004
            
            479,778
            
            Accrued
                Board Member Stipends
            
            18,750
            
            Chief
                Executive
              Officer/DirectorDecember
                31, 2004
            
            479,778
            
            Accrued
                Board Member Stipends
            
            18,750
            
            Director
                (COB)/
              Former
                ConsultantDecember
                31, 2004
            
            479,778
            
            Accrued
                Board Member Stipends
            
            18,750
            
            Chief
                Operating Officer/DirectorDecember
                31, 2004
            
            479,778
            
            Accrued
                Board Member Stipends
            
            18,750
            
            Director/Former
                PresidentDecember
                31, 2004
            
            479,778
            
            Accrued
                Board Member Stipends
            
            18,750
            
            President
                Director/ Former ConsultantDecember
                31, 2004
            
            479,778
            
            Accrued
                Board Member Stipends
            
            18,750
            
            Director/Former
                President of SubsidiaryDecember
                31, 2004
            
            479,778
            
            Accrued
                Board
              Member
                Stipends
            
            18,750
            
            DirectorDecember
                31, 2004
            
            359,833
            
            Accrued
                Board
              Member
                Stipends
            
            14,065
            
            Chief
                Financial OfficerDecember
                31, 2004
            
            4,444,444
            
            Bonus
            
            200,000
            
            Chief
                Executive Officer/DirectorDecember
                31, 2004
            
            3,888,889
            
            Bonus
            
            175,000
            
            Chief
                Financial OfficerDecember
                31, 2004
            
            3,888,889
            
            Bonus
            
            175,000
            
            Chief
                Operating Officer/DirectorDecember
                31, 2004
            
            694,444
            
            Bonus
            
            31,250
            
            Chief
                Technology Officer/Former ConsultantDecember
                31, 2004
            
            833,333
            
            Bonus
            
            37,500
            
            Senior
                Vice- PresidentDecember
                31, 2004
            
            2,777,778
            
            Bonus
            
            125,000
            
            President/Director/
                Former ConsultantDecember
                31, 2004
            
            1,444,444
            
            Bonus
            
            65,000
            
            EmployeeDecember
                31, 2004
            
            2,444,444
            
            Bonus
            
            110,000
            
            EmployeeDecember
                31, 2004
            
            670,556
            
            Bonus
            
            30,175
            
            EmployeeDecember
                31, 2004
            
            530,556
            
            Bonus
            
            23,875
            
            EmployeeDecember
                31, 2004
            
            500,000
            
            Bonus
            
            22,500
            
            EmployeeDecember
                31, 2004
            
            412,720
            
            Bonus
            
            18,572
            
            EmployeeDecember
                31, 2004
            
            523,144
            
            Bonus
            
            23,541
            
            EmployeeDecember
                31, 2004
            
            88,040
            
            Bonus
            
            3,962
            
            EmployeeDecember
                31, 2004
            
            281,250
            
            Bonus
            
            12,656
            
            EmployeeDecember
                31, 2004
            
            61,040
            
            Bonus
            
            2,747
            
            EmployeeDecember
                31, 2004
            
            68,000
            
            Bonus
            
            3,060
            
            EmployeeDecember
                31, 2004
            
            20,000
            
            Bonus
            
            900
            
            EmployeeDecember
                31, 2004
            
            550,922
            
            Bonus
            
            24,791
            
            Employee
                of SubsidiaryDecember
                31, 2004
            
            83,333
            
            Bonus
            
            3,750
            
            Former
                Employee of
              SubsidiaryDecember
                31, 2004
            
            374,078
            
            Bonus
            
            16,834
            
            Employee
                of SubsidiaryDecember
                31, 2004
            
            574,533
            
            Bonus
            
            25,854
            
            Employee
                of SubsidiaryDecember
                31, 2004
            
            397,456
            
            Bonus
            
            17,886
            
            Former
                Employee of
              SubsidiaryDecember
                31, 2004
            
            277,778
            
            Bonus
            
            12,500
            
            Employee
                of SubsidiaryDecember
                31, 2004
            
            133,333
            
            Bonus
            
            6,000
            
            Employee
                of SubsidiaryDecember
                31, 2004
            
            116,667
            
            Bonus
            
            5,250
            
            Employee
                of SubsidiaryDecember
                31, 2004
            
            185,189
            
            Bonus
            
            8,334
            
            Employee
                of SubsidiaryDecember
                31, 2004
            
            222,222
            
            Amount
                owed
              for
                services
            
            10,000
            
            AccountantDecember
                31, 2004
            
            31,519,878
            
            Officer
                Stock Option
              Grant
            
            1,418,394
            
            Chief
                Executive Officer /DirectorDecember
                31, 2004
            
            21,013,252
            
            Officer
                Stock Option
              Grant
            
            945,596
            
            Chief
                Operating Officer /DirectorDecember
                31, 2004
            
            15,759,939
            
            Officer
                Stock Option
              Grant
            
            709,197
            
            Chief
                Financial OfficerDecember
                31, 2004
            
            10,506,626
            
            Officer
                Stock Option
              Grant
            
            472,798
            
            Director
                /Former
              PresidentDecember
                31, 2004
            
            10,506,626
            
            Officer
                Stock Option
              Grant
            
            472,798
            
            President
                / Director /
              Former
                ConsultantDecember
                31, 2004
            
            10,506,626
            
            Officer
                Stock Option
              Grant
            
            472,798
            
            Chief
                Technology Officer/ Former
                Consultant





According
      to option agreements in connection with the above shares, the option prices
      were
      the lower of $0.675 ($ .045 pre-split) per share or one-half of the closing
      market price on the last reported sale or closing price on the date of the
      agreement. The above options that were exercised were issued at $0.675 ($ .045
      pre-split) per share.




72





During
      the year ended December 31, 2005, the Company issued the following options
      to
      acquire Common stock, all of which shares are stated in post-split
      amounts:





Date
                Issued
            
            Shares
            
            Consideration
            
            Valuation
            
            Relationship9/27/2005
            
            
            81,481
            
            Additional
              stock options per
            
            $
            55,000
            
            Former
              President / Director settlement agreement9/27/2005
            
            
            1,542,176
            
            Settlement
              Agreement
            
            $
            1,256,873
            
            Consultant
              / Affiliate or Former President12/9/2005
            
            
            37,500
            
            Director
              Bonus
            
            $
            55,875
            
            Former
              Director12/9/2005
            
            
            30,000
            
            Director
              Severance
            
            $
            29,700
            
            Former
              Director12/31/2005
            
            
            2,945,763
            
            Officer
              Stock Option Grant
            
            $
            1,988,390
            
            Chief
              Executive Officer/ Director12/31/2005
            
            
            1,963,842
            
            Officer
              Stock Option Grant
            
            $
            1,325,593
            
            Chief
              Operating Officer / Director12/31/2005
            
            
            1,472,882
            
            Officer
              Stock Option Grant
            
            $
            994,195
            
            Chief
              Financial Officer12/31/2005
            
            
            490,961
            
            Officer
              Stock Option Grant
            
            $
            331,398
            
            Director
              / Former President12/31/2005
            
            
            981,921
            
            Officer
              Stock Option Grant
            
            $
            662,797
            
            Chief
              Technology Officer / Former Consultant12/31/2005
            
            
            981,921
            
            Officer
              Stock Option Grant
            
            $
            662,797
            
            Chief
              Operating Officer12/31/2005
            
            
            2,454,803
            
            Officer
              Stock Option Grant
            
            $
            4,394,097
            
            Director





The
      above
      scheduled stock options include only those recorded at intrinsic value (see
      Note
      1 above). Other stock options with no intrinsic value (i.e., not discounted)
      are
      discussed below, but are not required to be recorded in the financial
      statement.





EXECUTIVE
      STOCK OPTIONS PLAN





In
      May
      2004, the board of directors approved an Officers' Stock Option Grant Plan,
      pursuant to which certain officers are entitled to receive stock options, for
      each of three years, beginning in 2004 (Year 1). The annual number of option
      shares to be issued will be equal to amounts that, after the exercise of such
      options, would affect ownership of various percentages of the total shares
      then
      issued and outstanding. The following officers received options for restricted
      shares in the following percentages: CEO - 3% in each of the three years (total
      9%); COO - 2% in each of the three years (total 6%), CFO - 2.0% in Year 1 and
      1.5% in each of the following years (total 5.0%), Director and former President
      - 1.0% in Year 1 and .5% in each of the following years (total 2%), current
      President - 1% in each of the three years (total 3%), and CTO - 1% in each
      of
      the three years (total 3%). The recipient's rights to the options will are
      fully
      vested as of December 31, 2004, although compensation expense is recorded at
      the
      completion of each year. The total of 6,654,166 (99,812,946 pre-split) option
      shares issuable for 2004. The stock options are exercisable at the lower of
      $
      0.675 ($.045 pre-split) per share, based on one-half of the average closing
      market price for the shares during the ten day period prior to the vesting
      date
      of December 31, 2004, or 50% of the closing market price on the date of
      exercise.





In
      addition to the above parties, the Corporate Secretary / general counsel and
      the
      Senior Vice-President were awarded 1% and 2%, respectively, of the total shares
      outstanding, at the fair market value of the Company's stock on the date the
      options were granted. Also, a board member, Randolph Dumas, was awarded 2.5%
      of
      the total shares outstanding, exercisable at $1.79 per share at the date of
      issuance. A total of 13,992,374 options shares were granted for 2005.





STOCK
      OPTION BONUS PLANS





In
      December 2004, the Company established its 2004 Stock Option Bonus
      Plan,


wherein
      the board of directors authorized the issuance of stock options for restricted
      shares totaling 1,765,832 (26,487,483 pre-split) shares to the officers and
      employees of the company as payment of accrued bonuses through December 31,
      2004. The stock options are exercisable at the lower of $0.675 ($.045 pre-split)
      per share, based on one-half of the average closing market price for the shares
      during the ten-day period prior to the vesting date of December 31, 2004, or
      50%
      of the closing market price on the date of exercise.





In
      December 2004, the board of directors authorized the issuance of stock options
      for restricted shares totaling 247,885 (3,718,279 pre-split) shares to the
      directors of the company as payment of accrued board members' stipends through
      December 31, 2004. The stock options are exercisable at the lower of $0.5865
      ($.0391 pre-split) per share or 50% of the closing market price on date of
      exercise.





In
      November 2005, the Company established its 2005 Stock Option Bonus Plan, wherein
      the board of directors authorized the issuance of stock options for restricted
      shares totaling 1,509,180 (post-split) shares to the officers and employees
      of
      the company as payment of accrued bonuses through December 31, 2005. The stock
      options are exercisable at $2.12, based on the closing market price of the
      Company's free-trading shares on the date the options were granted. Through
      the
      date of this report, none of these options have been exercised.




73





During
      2005, the board of directors authorized the issuance of stock options for
      restricted shares totaling 199,490 (post-split) shares to the directors of
      the
      company as board members' compensation for services through December 31, 2005.
      The stock options are exercisable at various amounts, ranging from $1.99 to
      $4.35 per share, based on the closing market price of the Company's free-trading
      shares on the date the options were granted, except for a now former director
      who was issued 37,500 and 30,000 (post-split) options shares at $1.49 and $0.99,
      respectively. Through the date of this report, none of these options have been
      exercised.





All
      of
      the options granted during 2005, unless otherwise discounted as noted above,
      were exercisable based on the closing market price of the Company's free-trading
      shares. Accordingly, whereas through December 31, 2005 the Company expenses
      stock options only at intrinsic value (per APB 25 - see Note 1 above), no
      expense was recorded for shares exercised based on the closing price of the
      Company's free-trading shares at the date granted.





2004
      STOCK OPTIONS EXERCISED IN 2005





During
      2005, a total of 1,785,490 (26,782,350 post-split) of the above options shares
      were exercised and issued (net of shares used to pay for "cashless" options"),
      with payment in cash and common stock subscriptions receivable totaling $92,906,
      pursuant to the 2004 Stock Option Bonus Plan, the Officers' Stock Option Grant
      Plan, and for accrued board members' stipends, and, furthermore, these shares
      were registered by the Company's filing a Form S-8 registration statement.
      The
      number of shares registered were allocated to the individuals exercising the
      options based a ratio of the number of options held by each individual to the
      total number of options held by all individuals.





**NOTE
      27 - PREFERRED STOCK**





SERIES
      A





In
      October 2003, the Company entered into an agreement with Fordham Financial
      Management Inc. to raise funds. In accordance with the agreement, the investors
      will receive preferred shares convertible into common stock upon investment.
      An
      Offering Circular was made available to investors on October 17, 2003.





The
      offering was for maximum of 150,000 shares ("Shares") of Series A Convertible
      Redeemable Preferred Stock, par value $.001 per share ("Series A Preferred").
      The shares have a liquidation preference of $16.67 per share and each share
      is
      convertible into a number of shares of Common Stock determined by dividing
      the
      number of shares of Common Stock outstanding as of the date of conversion by
      three, and dividing the result of that calculation by 250,000. The Company
      may
      redeem the Shares at $.001 per share at any time after the second anniversary
      of
      the date of issuance. Such redemption would effectively require the investor
      to
      convert his shares at that time or lose the entire amount of his
      investment.





As
      part
      of the offering, the Company agreed to pay its investment banking consultant,
      Fordham Financial Management, Inc. a 10% commission, plus 100,000
      Shares.





The
      Company had $1,200,000 subscribed as of December 31, 2003, and had received
      $717,140 ($1,200,000 less related expenses of $107,860 and $375,000 of
      subscriptions receivable). The full amount of $2,500,000 had been subscribed
      as
      of January 31, 2005, and the $2,250,000 ($2,500,000 total less 10% commission)
      had been received as of February 6, 2005.





During
      2004, preferred shareholders converted a total 153,500 shares into 10,642,666
      (159,640,000 pre-split) of the Company's common stock, based on conversation
      ratio of 1,040 common shares for each preferred share owned, in accordance
      with
      the formula described above. The Company had remaining 96,500 Series A Preferred
      Shares issued and outstanding, representing $697,500 subscribed, as of December
      31, 2004. During 2005, the preferred shareholders converted a total all of
      the
      remaining 96,500 Series A Preferred shares into 8,911,651 (pre-split) shares
      of
      the Company's common stock.





SERIES
      B





On
      April
      27, 2004, the Company agreed to sell 1,000 shares of Series B Preferred Stock
      of
      GlobeTel Communications Corp. (GTE) to Caterham Financial Management, Ltd.,
      a
      Malaysian company (Caterham), for a total investment of $15 million. The Company
      intended to use $5 million of this investment for working capital and $10
      million to purchase two Stored Value Card Data switches.





The
      agreement was later modified so that the total number of shares is 35,000 for
      the same investment convertible into the same amount of common stock as agreed
      upon on April 27, 2005.





With
      respect to the $5 million in working capital, Caterham had agreed to advance
      $1
      million to GlobeTel Communications on May 7, July 1, September 1, November
      1 and
      December 31 of 2004. The Agreement provides that Caterham has a 10 day grace
      period, in which to make any scheduled payments. With respect to the Master
      Card
      Data switches, Caterham has agreed to advance an aggregate of $5 million to
      GlobeTel Communications to purchase a Stored Value Card Data Switch, which
      will
      be located in Miami, Florida and subsequently a second switch will be installed
      in the Company's Hong Kong operations.




74





The
      Certificate of Designation for the Series B Preferred Stock was filed with
      the
      State of Delaware on July 30, 2004.





Except
      for voting rights and conversion rights, each share of Series B Preferred Stock
      shall have rights that are identical to shares of the Company's common stock.
      The Series B Preferred Stock issued to Caterham and its nominees will have
      voting rights equal to 50% plus one share of the Company's authorized shares
      of
      common stock for a period of three years beginning on the first closing date
      an
      ending three years thereafter, provided that Caterham and/or its nominee have
      not converted more than 15% of their Series B Preferred Stock into the Company's
      common stock during this time period. In March 2005 the Company and Caterham
      amended the agreement to revise voting rights to specify that provided at least
      85% of the Series B Preferred Stock remains outstanding, the holders of the
      Series B Preferred Stock, voting as a group, will have voting rights equal
      to
      50% plus one shares of the Company's authorized shares of common stock for
      a
      period up to and including April 30, 2005. Thereafter the holders shall have
      one
      vote for each share of common stock for which the Series B Preferred Stock
      may
      be converted, regardless of the percentage of Series B Preferred Stock
      outstanding.





Beginning
      on the first anniversary after the first closing date and expiring two years
      thereafter, Caterham and its nominees may convert (in whole or in part) its
      Series B Preferred Stock into GlobeTel common stock. Each 1,000 share increment
      of Series B Preferred Stock, as a class, issued to Caterham and its nominees
      shall be convertible into that number of shares of the Company's common stock
      equal to 1% of GlobeTel then issued and outstanding shares (the "Aggregate
      Conversion Shares") as determined on the date in which Caterham, or one of
      its
      nominees, first converts its Series B Preferred Stock into the Company's common
      stock (the "First Conversion Date"). In March 2005, the Company and Caterham
      amended the agreement to revise conversion rights to provide issuance of 369,467
      (5,542,000 pre-split) shares of GlobeTel common stock. Each holder of the Series
      B Preferred Stock will receive shares of GlobeTel aggregate conversion shares
      based on his pro-rata ownership of the Series B Preferred Stock. Three years
      after the first closing date, all of the shares of GlobeTel's Series B Preferred
      Stock which have not converted into GTEL common stock will be automatically
      converted into shares of GlobeTel's common stock.





The
      Company had subscribed and received $3,350,000 as of December 31, 2004 (net
      of
      $11.5 million of subscriptions receivable). A total of $2,850,000 was received
      from Caterham; an amount representing $500,000 was issued to Charterhouse in
      settlement of outstanding obligations (see Note 10 above). In addition an amount
      representing $150,000, was issued as a broker's fee.





In
      January 2005 an additional $250,000 was received from Caterham. The remaining
      amount of the subscription receivable was subsequently received during 2005
      in
      the form of $4,835,200 of telecommunication equipment - the data switch in
      connection with the Stored Value Card program.





In
      December 2005, the Company entered into an agreement with Caterham wherein
      all
      35,000 Series A Preferred shares were converted into 12,931,334 post-split
      shares of GlobeTel common stock in full settlement of all obligations of the
      parties.





SERIES
      C





On
      April
      27, 2004, the Company agreed to sell 1,000 shares of Series C Preferred Stock
      of
      GlobeTel Communications Corp. ("GTE") to Tim Ingram, a Hong Kong based
      investment banker, for a total investment of $1 million. The Company intended
      to
      use this $1 million investment for working capital and purchase of equipment
      necessary to expand the Company's Stored Value Card Programs.





On
      July
      30, 2004, the Company filed a Certificate of Designation for Series C Preferred
      Stock with the State of Delaware.





Provided
      that the preferred shares have not been converted, the holders of the Series
      C
      Preferred Stock, voting as a group, will have voting rights equal to the current
      conversion share amount at the time of the vote of GTE's authorized shares
      of
      common stock for a period of three years from the first closing
      date.





For
      a
      period of one year after the first closing date, the Series C Preferred Stock
      shall not be convertible into shares of GlobeTel Communications common stock.
      Beginning on the first anniversary of the first closing date and for a period
      of
      two years thereafter, Tim Ingram may convert (in whole or part) its Series
      C
      Preferred Stock into GlobeTel Communications common stock. Each 1,000 shares
      of
      Series C Preferred Stock will represent 2% of the GlobeTel Communications common
      in their converted state. The Series C Preferred Stock shall be convertible
      in
      at least 100 share increments, each increment, at the time of conversion, will
      represent one tenth of 2% of the issued and outstanding shares of GlobeTel
      Communications common stock. On the third anniversary of the First Closing
      Date,
      all shares of Series C Preferred Stock owned by Tim Ingram will automatically
      be
      converted into GlobeTel Communications common stock (to the extent such shares
      have not been converted into common stock prior to this date). Except for the
      aforementioned voting rights and conversion rights, each share of Series C
      Preferred Stock shall have rights that are identical to that of GlobeTel
      Communications' common stock.




75





Ingram
      agreed to advance $1 million to GlobeTel Communications on or before June 25,
      August 25, October 25 and December 25, 2004. Mr. Ingram advanced $250,000 to
      the
      Company on June 25, 2004 as agreed, and 250 shares of Series C Preferred Stock
      were issued. Subsequently, Mr. Ingram notified the Company that he will not
      be
      funding the remaining $750,000 and instead agreed to assign the remaining amount
      to other groups wanting to invest in the Company. In December 2004, Mr. Ingram
      converted his preferred shares into 151,515 (2,272,727 pre-split) common shares,
      recorded at the then current market price of $1.65 ($ .11 pre-split) per common
      share, for a total of $250,000.





On
      August
      20, 2004, the Company agreed to sell 500 shares of Series C Preferred Stock
      of
      GlobeTel Communications Corp. ("GTE") to Paul E. Taboada for a total investment
      of $500,000. Mr. Taboada, an individual investor, has also been providing
      consulting services for the Company for over four years. The Company is using
      this $500,000 investment for working capital and purchase of equipment for
      Sanswire Networks, LLC, necessary to launch the prototype of the
      Stratellite.





The
      purchase price was payable in five (5) installments of $100,000, payable no
      later than August 30, 2004, September 30, 2004, October 30, 2004, November
      30,
      2004, and December 30, 2004. The Purchaser has a three-day cure period to remit
      the monthly payments. As of December 31, 2004, the Company has received the
      full
      $500,000 as agreed upon.





In
      September 2005, Mr. Taboada converted all 500 shares of Series C Preferred
      Stock
      into 820,000 (12,300,000 pre-split) shares of the Company's common stock based
      on 1% of the then outstanding total of the Company's common stock, as agreed
      upon by the parties.





On
      October 22, 2004, the Company agreed to sell 250 shares of Series C Preferred
      Stock of GlobeTel Communications Corp. ("GTE") to Lawrence Lynch for a total
      investment of $250,000. Mr. Lynch, an individual investor, is also the current
      Chief Operating Officer of the Company. The Company used this $250,000
      investment for working capital and purchase of equipment necessary to expand
      the
      Company's stored value card programs.





In
      November 2005, Mr. Lynch converted all 250 shares of Series C Preferred Stock
      into 500,000 (7,500,000 pre-split) shares of the Company's common stock.





As
      of
      December 31, 2005, the there were no subscriptions receivable for Series C
      preferred stock, all shares were converted into Company common stock, and the
      Company does not anticipate issuing any additional shares in connection with
      this preferred stock series.





SERIES
      D





On
      July
      28, 2004, the Company agreed to sell 1,000 shares of Series D Preferred Stock
      of
      GlobeTel Communications Corp. ("GTE") to Mitchell A. Siegel, former Chief
      Operating Officer and current Vice President and Director of the Company. The
      Company intends to use $1 million of this investment for working capital and
      purchase of equipment necessary to expand the Company's stored value card
      programs.





Mitchell
      A. Siegel agreed to advance $1 million to GTEL in four (4) quarterly
      installments beginning August 2004. The agreement was subsequently modified
      for
      the installment period to be semi-annual and to begin in October 2004. Mr.
      Siegel has remitted the initial $250,000, and in June 2005, remitted the second
      $250,000.





The
      Certificate of Designation for the Series D Preferred Stock was filed with
      the
      State of Delaware on July 30, 2004.





Provided
      that the preferred shares have not been converted, the Holders of the Series
      D
      Preferred Stock, voting as a group, will have voting rights equal to the current
      conversion share amount at the time of the vote of GTE's authorized shares
      of
      common stock for a period of three years from the first closing date.





For
      a
      period of two years after the first closing date, the Series D Preferred Stock
      shall not be convertible into shares of GTE common stock. Beginning on the
      second anniversary of the first closing date and for a period of one year
      thereafter, Mitchell A. Siegel may convert (in whole or part) its Series D
      Preferred Stock into GTE common stock. The 1,000 shares of Series D Preferred
      Stock will represent 2% of the GTE common in their converted state. The Series
      D
      Preferred Stock shall be convertible in at least 100 share increments, each
      increment, at the time of conversion, will represent one tenth of 2% of the
      issued and outstanding shares of GTE common stock. On the third anniversary
      of
      the first closing date, all shares of Series D Preferred Stock owned by Mitchell
      A. Siegel will automatically be converted into GTE common stock (to the extent
      such shares have not been converted into common stock prior to this date).
      Except for the aforementioned voting rights and conversion rights, each share
      of Series
      D
      Preferred Stock shall have rights that are identical to that of GTE's common
      stock.




76





The
      Company expects to receive the remaining $500,000 in stock subscriptions
      receivable from Mr. Siegel in the near term.





**NOTE
      28 - SEGMENTS AND RELATED INFORMATION**





During
      the year 2001, the Company adopted FASB Statement No. 131 (SFAS No. 131),
      "Disclosures about Segments of an Enterprise and Related Information," which
      changes the way the Company reports information about its operating
      segments.





The
      accounting policies of the segments are the same as those described in the
      summary of significant accounting policies. All inter-segment sales prices
      are
      market based. The Company evaluates performance based on operating results
      of
      the respective business units, segregated into telecommunications services
      (international wholesale carrier traffic, networks, prepaid calling services,
      internet telephony, stored value services and Super Hubs(TM) and the Sanswire
      Stratellite project. The "Unallocated" column includes expenses incurred by
      and
      net other income realized by the parent corporation, GlobeTel, including
      corporate operating expenses, not specifically allocated to either operating
      segment.





**2005**
            
            **TELECOM**
            
            **SANSWIRE**
            
            **UNALLOCATED**
            
            **TOTALS**Revenues
                Earned
            
            $
            10,136,168
            
            
            —
            
            $
            8,644
            
            $
            10,144,812Cost
                of Revenue Earned
            
            
            9,722,749
            
            
            —
            
            
            8,335
            
            
            9,731,084GROSS
                MARGIN (LOSS)
            
            
            413,388
            
            
            —
            
            
            309
            
            
            413,697Expenses
            
            
            2,355,398
            
            
            4,300,866
            
            
            23,970,231
            
            
            30,626,495Loss
                Before Other Income (Expense) and Income Taxes
            
            
            (1,942,010
            )
            
            (4,300,866
            )
            
            (23,969,922
            )
            
            (30,212,798
            )Other
                Income (Expense)
            
            
            (1,740,594
            )
            
            —
            
            
            (3
            )
            
            (1,740,597
            )Loss
                Before Income Taxes
            
            
            (3,682,604
            )
            
            (4,300,866
            )
            
            (23,969,925
            )
            
            (31,953,395
            )Income
                Taxes
            
            
            —
            
            
            —
            
            
            —
            
            
            —NET
                LOSS
            
            
            ($3,682,604
            )
            
            ($
                4,300,866
            )
            
            ($23,969,925
            )
            
            ($31,953,395
            )







**2004**
            
            **TELECOM**
            
            **SANSWIRE**
            
            **UNALLOCATED**
            
            **TOTALS**Revenues
                Earned
            
            $
            11,309,376
            
            
            —
            
            
            —
            
            $
            11,309,376Cost
                of Revenue Earned
            
            
            11,500,577
            
            
            —
            
            
            —
            
            
            11,500,577GROSS
                MARGIN (LOSS)
            
            
            (191,201
            )
            
            —
            
            
            —
            
            
            (191,201
            )Expenses
            
            
            901,076
            
            
            746,827
            
            
            11,202,347
            
            
            12,850,250Loss
                Before Other Income (Expense) and Income Tax
            
            
            (1,092,277
            )
            
            (746,827
            )
            
            (11,202,347
            )
            
            (13,041,451
            )Other
                Income (Expenses)
            
            
            (379,511
            )
            
            254,093
            
            
            (125,418
            )Loss
                Before Income Taxes
            
            
            (1,471,788
            )
            
            (746,827
            )
            
            (10,948,254
            )
            
            (13,166,869
            )Income
                Taxes
            
            
            —
            
            
            —
            
            
            —
            
            
            —NET
                LOSS
            
            
            ($
                1,471,788
            )
            
            ($
                746,827
            )
            
            ($10,948,254
            )
            
            ($13,166,869
            )




77




**NOTE
      29 - SUBSEQUENT EVENTS (restated)**





**SEC
      Investigation**





In
      September 2006 the SEC issued a formal order of investigation regarding certain
      issues with respect to the Company. On October 5, 2007, GlobeTel Communications
      Corp., received a "Wells Notice" from the Securities and Exchange Commission
      ("SEC") in connection with the SEC’s ongoing investigation of the Company. The
      Wells Notice provides notification that the staff of the SEC intends to
      recommend to the Commission that it bring a civil action against the Company
      for
      possible violations of the securities laws including violations of Sections
      5
      and 17(a) of the Securities Act of 1933; Sections 10(b), 13(a), and 13(b)(2)(A)
      & (B) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rules
      10b-5, 12b-20, 13a-1, 13a-11, and 13a-13 thereunder; and seeking as relief
      a
      permanent injunction, civil penalties, and disgorgement with prejudgment
      interest. The staff is also considering recommending that the SEC authorize
      and
      institute proceedings to revoke the registration of Company’s securities
      pursuant to Section 12(j) of the Exchange Act. Under the process established
      by
      the SEC, recipients have the opportunity to respond in writing to a Wells Notice
      before the SEC staff makes any formal recommendation to the Commission regarding
      what action, if any, should be brought by the SEC.




Redwood
      Grove Financing




During
      the first quarter of 2006, the Company received additional investments totaling
      over $4 million. Convertible promissory notes with face values totaling $1.8
      million were issued, and, after commissions, fees and costs, a net of $1,579,487
      was received in January 2005. In February 2005 the notes were converted into
      a
      total of 23,574,615 shares of the Company's common stock. In March 2005 the
      investors exercised warrants to purchase a total of 35,366,285 additional shares
      of common stock for an additional $2,625,025, including amount due under a
      redemption buyout of the warrant shares.




On
      February 5, 2005 GlobeTel filed a registration statement with the Securities
      and
      Exchange Commission on Form SB-2 to register shares offered by shareholders
      who
      may convert, and eventually did as discussed above, their convertible notes,
      and
      additional shares to ensure sufficient number of shares are available for
      conversion. Further, additional shares totaling 75% of the underlying
      convertible notes and warrants to ensure that shares are available for
      conversion under all contingencies.





Appointment
      of Jonathan Leinwand as Director





The
      Board
      of Directors appointed Jonathan Leinwand to the Board of Directors effective
      August 18, 2005. Mr. Leinwand was and continued to be the Company’s General
      Counsel, until September 10, 2007 when he was named Chief Executive
      Officer.





Appointment
      and Resignation of Sir Christopher Meyer as Director





The
      Board
      of Directors appointed Sir Christopher Meyer as a Director effective September
      13, 2005. Sir Christopher has served as the head of the UK Press Complaints
      Commission since 2003 and from 1997 until 2003 he was the UK ambassador to
      the
      United States. Sir Christopher has also been elected by the Board to be its
      Chairman and to serve on the Audit Committee. Sir Christopher subsequently
      resigned on March 21, 2006. He had no disputes with the Company.





American
      Stock Exchange Deficiency Letter





On
      December 19, 2005 the Company received a letter from the American Stock
      Exchange, pursuant to Rule 1009(a)(i) of the American Stock Exchange Company
      Guide that it had not timely filed with the Exchange an Additional Listing
      Application to list shares that had been issued by the Company since its initial
      listing in May 2005. The Company has subsequently filed such an application
      with
      the Exchange.





According
      to the letter, the Exchange determined not to apply, at that time, continued
      listing evaluation and follow-up procedures.





Agreement
      with Internafta





On
      December 29, 2005, GlobeTel Wireless Corp. a wholly-owned subsidiary of GlobeTel
      Communications Corp. has entered into an agreement with LLC Internafta, a
      Russian corporation, whereby Internafta will pay GlobeTel $600 million to
      construct and install a communications network in the 30 largest Russian cities.
      This communications network will utilize GlobeTel’s HotZone 4010 WiMax (802.16e)
      capable radio. It is intended that this network will provide wireless broadband
      access, Voice over IP capabilities, DECT functionality, and IPTV capabilities.





The
      networks will be installed in the cities over a 27-month period. Payments to
      GlobeTel are pursuant to a schedule that includes certain milestones. Payments
      will be made via a Letter of Credit confirmed by a US money center bank.
      GlobeTel will not commence construction until the first payment has been made
      by
      Internafta. Additionally, GlobeTel will help operate the Russian networks once
      constructed and will be a 50/50 joint venture partner with Internafta in the
      networks’ operations.




78





In
      May
      2006, GlobeTel announced that it was terminating the Joint Venture
      Agreement





Warrant
      Agreement





On
      January 9, 2006, GlobeTel entered into agreements with the investors in its
      August 2005 Convertible Note placement for them to exercise their warrants
      that
      had an exercise price of $2.50 per share. The investors will exercise their
      warrants and the Company will issue to the investors a total of 1,935,606 new
      warrants with an exercise price of $4.00 per share.





The
      investors were given “piggy-back” registration rights for the warrants. If the
      warrants have not been registered after one year, then the investors have a
      demand registration rights.





The
      warrants expire on August 31, 2008.





Appointment
      and Resignation of Michael Castellano and Dorian Klein as
      Directors





The
      Board
      of Directors appointed Dorian Klein and Michael P. Castellano to serve as
      directors on GlobeTel’s Board of Directors.





Mr.
      Castellano subsequently resigned as a director on March 14, 2007.





Mr.
      Klein
      subsequently resigned as a director on October 7, 2006.





Appointment
      and Resignation of J. Randolph Dumas as Director





The
      Board
      of Directors appointed J. Randolph Dumas as a Director and Executive Vice
      Chairman on November 30, 2005. Mr. Dumas was a partner of Salomon Brothers
      International Limited responsible for the firm's European corporate finance,
      mortgage securities and real estate investment banking businesses, and a
      managing Partner of two private equity firms focusing on telecommunications
      and
      European leveraged buyouts. Upon the resignation of Sir Christopher Meyer in
      March 2006, Mr. Dumas was elected Chairman. Mr. Dumas resigned on October 7,
      2006 in conjunction with a management restructuring. He had no disputes with
      the
      Company.





Retirement
      of Thomas Jimenez





On
      April
      7, 2006, Thomas Jimenez retired as Chief Financial Officer of GlobeTel
      Communications Corp. Mr. Jimenez had no disputes with the Company.





Appointment
      and Termination of Lawrence Lynch





On
      April
      10, 2006 Chief Operating Officer Lawrence Lynch was named acting Chief Financial
      Officer, following Mr. Jimenez’s retirement. Subsequently, Mr. Lynch had been
      promoted to the Company’s Chief Operating Officer. He joined the Company as Vice
      President in July 2004. On October 25, 2006, Mr. Lynch was dismissed from the
      Company.





Appointment
      and Resignation of Ambassador Ferdinando Salleo as Director





On
      May
      16, 2006, the Board of Directors appointed Ambassador Ferdinando Salleo, former
      Italian ambassador to the United States, as Director. Ambassador Salleo resigned
      as Director on October 7, 2006 in conjunction with a management restructuring.
      He had no disputes with the Company.





American
      Stock Exchange





On
      July
      18, 2006 certain regulatory officials at the American Stock Exchange called
      the
      Company and stated that they intended to send a notice to the Company that
      the
      Company’s common shares currently traded on the Exchange would be de-listed. On
      July 19, 2006 the Company received a letter from the American Stock Exchange
      stating that the Exchange intended to de-list the Company’s shares because the
      Company’s press releases were “overly promotional” and that the Company had not
      provided all requested documentation to the Exchange pursuant to a request
      for
      information.





GlobeTel
      disputes that its press releases violated Exchange standards and has attempted
      to work diligently with the Exchange to assure its compliance in this area.
      Additionally, the Company did respond to the request for information and did
      not
      receive any indication that the documentation was incomplete.




79





The
      Company appealed this determination by the AMEX staff.





On
      August
      18, 2006 the Company received notice from the Amex Staff updating and
      supplementing its letter dated July 17, 2006 concerning its allegations that
      the
      Company no longer complies with Exchange's continued listing standards. In
      addition to the alleged violations set forth in its July 18, 2006 letter the
      Staff alleges violations of the following sections of the Amex Company Guide:
      120 (Review of Related Party Transactions), 127 (Discretionary Authority of
      the
      Amex), 134 (Filing Requirements with a reference to Section 1101), 402
      (Explanation of Exchange Disclosure Policies), 403 (Content and Preparation
      of
      Public Announcements), 404 (Exchange Surveillance Procedures), 921 (Notification
      of the Exchange Upon Change in Officers and Directors), 1002(d) and (e) (Failure
      to Comply with Listing Agreement, Any Other Event That Would Warrant Delisting
      [referencing Sec 127 listed above]), 1003(d) (Failure to Comply with Listing
      Agreement and/or SEC Requirements) and 1101 (General Filing Requirements).





The
      Company was notified by letter dated August 18, 2006 that its appeal was to
      be
      heard by the Listing Qualifications Panel on September 28, 2006. On October
      3,
      2006 the Company received notice from the American Stock Exchange notifying
      the
      Company that the Amex Committee on Securities upheld the recommendation of
      the
      Amex Staff that the Company no longer complies with Exchange's continued listing
      standards including the following sections of the Amex Company Guide: 120
      (Review of Related Party Transactions), 127 (Discretionary Authority of the
      Amex), 134 (Filing Requirements with a reference to Section 1101), 401 ((Outline
      of Exchange Disclosure Policies), 402 (Explanation of Exchange Disclosure
      Policies), 403 (Content and Preparation of Public Announcements), 1001 (General
      Suspension and Delisting Policies), 1002(d) and (e) (Failure to Comply with
      Listing Agreement, Any Other Event That Would Warrant Delisting), 1003(d)
      (Failure to Comply with Listing Agreement and/or SEC Requirements) and 1101
      (General Filing Requirements).




The
      Company decided not to further appeal this determination and the Company’s
      common shares began trading on the Pink Sheets under the symbol GTEM The Company
      disclosed to the SEC in a Form 25-NSE, on November 17, 2006, that it had
      received from the Amex a document dated November 17 entitled “ Determination and
      Notification of Removal from Listing And/or Registration under Section 12(b)
      of
      the Securities Exchange Act of 1934.





The
      2006 Westor Financing





Creation
      Of A Direct Financial Obligation Or An Obligation Under An Off-Balance Sheet
      Arrangement Of A Registrant; Unregistered Sales Of Equity
      Securities





On
      September 6, 2006, the Company entered into subscription agreements with Hudson
      Bay Overseas Fund Ltd, Hudson Bay Fund LP, Nite Capital LP, Castle Creek
      Technology, Double U Master Funder, The Nutmeg Group and Brio Capital LP whereby
      these investors bought a total $1,075,000 in 7% convertible notes, and were
      issued Class A and Class B Warrants (described below). The common shares
      underlying the notes and the warrants carry with them registration rights that
      obligated the Company to register such shares within 30 days.





The
      Notes
      were convertible into common stock at $0.36939 per share. Prior to any notice
      of
      conversion the Company had the right, under certain circumstances, to redeem
      the
      notes at a premium for cash, subject to a right to convert by the investor.
      The
      investors received one Class A Warrant to purchase one share of common stock
      for
      every two shares that the notes were convertible into on the closing date as
      well as one Class B Warrant to purchase the identical number of
      shares.





The
      Class
      A Warrants are exercisable for a purchase price equal to 150% of the market
      price on the day prior to closing and the Class B Warrants are exercisable
      for a
      purchase price equal to 200% of the market price on the day prior to closing.
      The Warrants have a 5 year term The Placement Agent for the transaction, Westor
      Capital Group, has the right to raise up to $3 million for the
      Company.





Appointment
      and Resignation of Patrick Heyn as Director





On
      September 27, 2006 the Board of Directors appointed Patrick Heyn to serve as
      an
      independent director on GlobeTel’s Board of Directors and to serve on the Audit
      Committee.





Mr.
      Heyn
      subsequently resigned as a Director on March 14, 2007.





Management
      Restructuring





On
      October 7, 2006 Amb.
      Ferdinando Salleo ,
      Dorian
      Klein, J. Randolph Dumas and Timothy Huff resigned as directors. Timothy Huff
      also resigned as Chief Executive Officer but remained as Chief Technology
      Officer until April 13, 2007, when he resigned.




80





The
      Board
      of Directors appointed Peter Khoury as the Company’s Interim Chief Executive
      Officer and appointed him to the Board of Directors. The Board also appointed
      Przemyslaw L. Kostro as a director and Interim Chairman of the Board of
      Directors.




Mr.
      Khoury subsequently resigned in September 2007 and was replaced as Chief
      Executive Officer by GlobeTel’s General Counsel, Jonathan Leinwand.





Lt.
      Colonel (USA/Ret.) Douglas B. Murch tendered his resignation as President of
      Sanswire Networks LLC on October 16, 2007.





Sale
      of Magic Money Division





On
      November 3, 2006, GlobeTel Communications Corp. entered into an agreement to
      sell substantially all of the assets related to its stored value card division
      that was also known as the Magic Money program, to Gotham Financial LLC. Under
      terms of the agreement, Gotham acquired substantially all of the assets, which
      include the stored value program, financial processing switch and contracts,
      and
      assumed the liabilities of associated with the program including certain
      employees and leased office space.





The
      agreement calls for the payment, over a 3 to 6 year period, of up to $4 million.
      The length of the payment period depends upon Gotham making certain minimum
      payments. Revenues earned by GlobeTel will be based on the successful rollout
      of
      the platform by Gotham and on user fees following a formula that considers
      the
      total number of transactions on a Stored Value card and use of the card at
      any
      ATM, POS or other transaction, under closed and committed contracts GlobeTel
      had
      at the time of sale, and the number of transactions utilizing the Financial
      Processing Switch.





The
      agreement also gives GlobeTel the right to the most favorable pricing if it
      decides in the future to utilize the services to be provided by
      Gotham.





Appointment
      and Subsequent Resignation of Michael DeCarlo as Interim CFO





On
      November 7, 2006, Michael A. DeCarlo Jr., was appointed as interim Chief
      Financial Officer. On March 21, 2007, Mr. DeCarlo resigned as Interim
      CFO.





Appointment
      and Termination of Joseph Monterosso Chief Operating Officer





On
      November 17, 2006, the Company announced the appointment of Joseph Monterosso
      as
      Chief Operating Officer, succeeding Mr. Lynch, who was dismissed from the
      Company. On April 27, 2007, Mr. Monterosso was terminated as COO.





Appointment
      and Resignation of Alice Muntz as Director





On
      November 20, 2006 the Company announced the appointment of Dr. Alice Muntz
      to
      the Company’s Board of Directors. Dr. Muntz resigned as a director on March 13,
      2007.





Change
      in Registrant's Certifying Accountant





On
      January 4, 2007, the Company’s Audit Committee dismissed Dohan and Company, CPAs
      PA as the Company's certifying accountant, and stated on that date that during
      the two years ended December 31, 2005 and December 31, 2004 and the subsequent
      interim periods through August 14, 2006, there were no disagreements with Dohan
      & Company on any matter of accounting principles or practices, financial
      statement disclosure, or auditing scope or procedure. The Audit Committee went
      on to say that the report of independent registered public accounting firm
      of
      Dohan and Company as of and for the two years ended December 31, 2005 and
      December 31, 2004, did not contain any adverse opinion or disclaimer of opinion,
      nor was it qualified or modified as to audit scope or accounting principle.
      The
      Company also engaged McKean Paul Chrycy Fletcher & Co. as the Company's
      certifying accountants.





Change
      in Registrant's Certifying Accountant





On
      March
      21, 2007, the Company was notified that McKean Paul Chrycy Fletcher & Co.
      declined to accept the engagement as the Company’s certifying public
      accountants. McKean Paul Chrycy Fletcher & Co. performed no services for the
      Company and did not have any disputes with the Company.





Completion
      of Agreement To Form “No Mas Cables” Joint Venture with VPN de Mexico S.A. de
      C.V





On April 3, 2007,
      the Company and VPN de Mexico S.A. de C.V., subsidiary of Grupo IUSA S.A. de
      C.V., Mexico, finalized an agreement that called for the creation of a joint
      venture company called “No Mas Cables de Mexico S.A. de C.V.” to be owned 51% by
      VPN and 49% by GlobeTel. The purpose of the joint venture is to install and
      operate wireless broadband networks utilizing GlobeTel's HotZone 4010 wireless
      base station. The parties had originally entered into a Test Network
      Installation Agreement in June 2006, pursuant to which GlobeTel installed a
      network in the Mexican city of Pachuca. As of the date of this filing, the
      Company retains its 49% ownership in No Mas Cables and recently re-affirmed
      its
      commitment to working with the Peralta family, owners of VPN de
      Mexico.




81





Entry
      Into A Material Definitive Agreement to Reprice Exercise Price of
      Warrants





On
      April
      13, 2007, the Company agreed to reprice the exercise price of warrants
      previously packaged with aforementioned Convertible Note financing in September
      2006 to $.20 per share, and increased the number of shares issuable upon
      exercise of such warrants 1.5 times the original amount of warrants issued.
      In
      consideration of the aforementioned the investors exercised their warrants
      which
      will result in the issuance of up to 4,839,014 shares of common being issued
      for
      a total consideration of up to $967,802.80. As of that date, warrants have
      been
      exercised for a total of 3,750,000 shares for total consideration of $750,000.
      The Company relied on the exemption from registration provided by Section 4(2)
      of the Securities Act of 1933, as amended (the "Securities Act"). The Company
      believes that the investors are 'accredited investors', as such term is defined
      in Rule 501(a) promulgated under the Securities Act.





Change
      in Registrant's Certifying Accountant





On
      April
      13, 2007, the Company appointed Weinberg & Company, P.A. of Boca Raton,
      Florida as the Company's new independent registered public accounting firm
      to
      audit and certify our financial statements for fiscal year ended December 31,
      2006. The Company had, on September 11, 2007, re-appointed previous independent
      auditor Dohan & Company P.A. to audit and certify restated financial
      statements for fiscal years ended December 31, 2004 and 2005. The Company
      maintains and intends to maintain its relationship with Weinberg & Company
      moving forward.





Entry
      Into a Material Definitive Agreement, Winding Down of Centerline, Refocus of
      Wireless Unit





On
      May 1,
      2007, the Company entered into a one-year consulting agreement with Ulrich
      Altvater, the former president of the GlobeTel Wireless subsidiary, providing
      for.Mr. Altvater to provide certain assembly and support services to the Company
      for its line of HotZone products, the intellectual property for which the
      Company purchased from Mr. Altvater's previous company in June 2005. In
      consideration for providing such services, the Company will pay Mr. Altvater
      a
      consulting fee of $45,000 per month. Additionally, Mr. Altvater would receive
      50% of the net proceeds resulting from any sales of HotZone products he
      generated.





Additionally,
      the Company decided to wind down the operations of its Centerline Communications
      LLC subsidiary. In conjunction therewith the Company is investigating whether
      to
      sell its related equipment, redeploy such equipment or a combination
      thereof.





The
      Company also reorganized its GlobeTel Wireless Corp. subsidiary to focus on
      the
      sale and implementation of wireless broadband networks. In conjunction with
      the
      restructuring, the Company entered into the above referenced consulting
      agreement with Mr. Altvater.





On
      July
      12, 2007, the Company announced that it terminated its agreement with Mr.
      Altvater and his company, Trimax Wireless, Inc., and filed a lawsuit against
      Trimax and Mr. Altvater to recover assets and money, totaling approximately
      $475,000, that belong to the Company’s shareholders.





Refinancing
      of Debt





On
      May 1,
      2007, GlobeTel Communications Corp. executed several Certificates of Adjustments
      for previously issued Warrants. The Warrants previously had Exercise Prices
      ranging from $0.75 to $1.00 and with the execution of the adjustments, the
      Exercise Price is now set at $0.196.




Non-Reliance
      on Previously Issued Financial Statements or a Related Audit Report or Completed
      Interim Review.





On
      May 4,
      2007, the Board of Directors of GlobeTel Communications Corp. (the "Company"),
      in consultation with its outside accounting consultant, determined that the
      Company will restate its financial statements for the years ended 2004 and
      2005,
      as reported on Form 10-K and for the interim periods in fiscal 2005 and the
      first two fiscal quarters of 2006 for which the Company filed reports on Form
      10-Q.





Letter
      of Intent with TAO Technologies GmbH





On
      September 26, 2007 the Company entered into a Letter of Intent with TAO
      Technologies GmbH for the Company to acquire 50% of TAO and its airship design
      patents. The LOI contemplates the acquisition of the interest for payment in
      both cash and stock. The LOI also modified the Company’s previous cooperation
      agreement with TAO signed in October 2005. Subsequent to the execution of the
      LOI, Sanswire, the Company’s wholly-owned subsidiary, shipped the Sanswire 2A
      Technology Demonstrator airship to TAO in Stuttgart, Germany for evaluation
      and
      overhaul.





82


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





Dismissal
      of Dohan & Co. PA





On
      January 4, 2007, the Audit Committee of the Board of Directors dismissed Dohan
      & Co., CPAs PA as the Company's certifying accountant.





During
      the two years ended December 31, 2005 and the subsequent interim periods until
      the change, there were no disagreements with Dohan & Co. on any matter of
      accounting principles or practices, financial statement disclosure, or auditing
      scope or procedure, which disagreements, if not resolved to the satisfaction
      of
      Dohan & Co. would have caused them to make reference in connection with
      their report to the subject matter of the disagreement, and Dohan & Co. has
      not advised the Company of any reportable events as defined in Item 304(a)(1)(v)
      of Regulation S-K.





The
      report of independent registered public accounting firm of Dohan & Co. as of
      and for the two years ended December 31, 2005, did not contain any adverse
      opinion or disclaimer of opinion, nor was it qualified or modified as to audit
      scope or accounting principle.





On
      January 4, 2007 the Company engaged McKean Paul Chrycy Fletcher & Co. as the
      Company's certifying accountants, which subsequently declined to accept the
      engagement. During the two years ended December 31, 2005, and through January
      4,
      2007, the Company did not consult with McKean Paul Chrycy Fletcher & Co.
      regarding any of the matters or events set forth in Item 304(a)(2)(i) and (ii)
      of Regulation S-K.





Appointment
      of Weinberg, PA





The
      Board
      of Directors of the Company appointed Weinberg & Company, P.A. of Boca
      Raton, Florida as the Company's new independent registered public accounting
      firm to audit and certify our financial statements for fiscal year
      ended December 31, 2006. Weinberg & Company has accepted this appointment
      and has been engaged by the Company. During the most recent fiscal year and
      through April 13, 2007, neither the Company nor any one on behalf of the Company has
      consulted with Weinberg & Company, P.A. regarding the application of
      accounting principles to a specified transaction, either completed or proposed,
      or the type of audit opinion that might be rendered on the Registrant's
      financial statements, or any other matters or reportable events required to
      be
      disclosed under Items 304 (a) (2) (i) and (ii) of Regulation
      S-K.





Limited
      Engagement of Dohan & Co., P.A.





The
      Company appointed Dohan & Co., P.A. (“Dohan”) CPAs of Miami, Florida as the
      Company’s independent registered public accounting firm to audit and certify our
      financial statements for fiscal year ended December 31, 2004 and 2005. The
      Board
      of Directors of the Company has approved the appointment of Dohan. Dohan has
      accepted this appointment and has been engaged by the Company  after
      assurances and verifications from the Company that previous management from
      2004
      and 2005 are no longer associated with the Company and have been since been
      replaced.





During
      the most recent fiscal year and through September 11, 2007, neither the Company
      nor any one on behalf of the Company has consulted with Dohan regarding the
      application of accounting principles to a specified transaction, either
      completed or proposed, or the type of audit opinion that might be rendered
      on
      the Company's financial statements, or any other matters or reportable events
      required to be disclosed under Items 304 (a) (2) (i) and (ii) of Regulation
      S-K.
      The Company provided Dohan with a copy of the applicable Form 8-K prior to
      filing it with the SEC.





**ITEM
      8A. CONTROLS AND PROCEDURES**





**Evaluation
      of Disclosure Controls and Procedures**





As
      required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended
      (the "Exchange Act"), the Company carried out an evaluation under the
      supervision and with the participation of Jonathan Leinward, the Company’s Chief
      Executive Officer and Principal Financial Officer (the “Reviewing Officer”), of
      the effectiveness of the Company's disclosure controls and procedures as of
      December 31, 2005. In designing and evaluating the Company's disclosure controls
      and procedures, the Company and its management recognize that there are inherent
      limitations to the effectiveness of any system of disclosure controls and
      procedures, including the possibility of human error and the circumvention
      or
      overriding of the controls and procedures. Accordingly, even effective
      disclosure controls and procedures can only provide reasonable assurance of
      achieving their desired control objectives. Additionally, in evaluating and
      implementing possible controls and procedures, the Company's management was
      required to apply its reasonable judgment. Furthermore, in the course of this
      evaluation, management considered certain internal control areas, including
      those discussed below, in which we have made and are continuing to make changes
      to improve and enhance controls. Based upon the required evaluation, the
      Reviewing Officer concluded that as of December 31, 2004, the Company's
      disclosure controls and procedures were not effective to ensure that information
      required to be disclosed by the Company in the reports it files or submits
      under
      the Exchange Act is recorded, processed, summarized and reported within the
      time
      periods specified in the Securities and Exchange Commission's rules and
      forms.




83





For
      the
      year ended December 31, 2003, the Company's independent auditors, Dohan and
      Company, CPA's, P.A. ("Dohan") advised management and the Board of Directors
      by
      a letter dated March 30, 2004, that in connection with its audit of the
      Company's consolidated financial statements for the year ended December 31,
      2003, it noted certain matters involving internal control and its operation
      that
      it considered to be a material weakness under standards established by the
      American Institute of Certified Public Accountants. Reportable conditions are
      matters coming to an independent auditors' attention that, in their judgment,
      relate to significant deficiencies in the design or operation of internal
      control and could adversely affect the organization's ability to record,
      process, summarize, and report financial data consistent with the assertions
      of
      management in the financial statements. Further, a material weakness is a
      reportable condition in which the design or operation of one or more internal
      control components does not reduce to a relatively low level the risk that
      errors or fraud in amounts that would be material in relation to the financial
      statements being audited may occur and not be detected within a timely period
      by
      employees in the normal course of performing their assigned functions. Dohan
      advised management and the Board of Directors that it considered the following
      to constitute material weaknesses in internal control and operations: (i) the
      Company's failure to adequately staff its finance group to effectively control
      the increased level of transaction activity, address the complex accounting
      matters and manage the increased financial reporting complexities and (ii)
      the
      Company's current monthly close process does not mitigate the risk that material
      errors could occur in the books, records and financial statements, and does
      not
      ensure that those errors would be detected in a timely manner by the Company's
      employees in the normal course of performing their assigned functions. Dohan
      noted that these matters were considered by them during its audit and did not
      modify the opinion expressed in its independent auditor's report dated March
      30,
      2004.





In
      light
      of the letter from Dohan, we identified deficiencies in our internal controls
      and disclosure controls related to our accounting and audit procedures.
      Specifically, the identified deficiencies involved the ineffective controls
      over
      (i) revenue reporting, (ii) audit preparation procedures and (iii) financial
      reporting procedures.





Remediation
      of Material Weaknesses





We
      have
      formulated a program to remedy the material weaknesses identified above. In
      the
      first phase of the program, already completed as of September 30, 2007, we
      have
      hired outside accountants and consultants to review our financial statements
      and
      prepare the restatement of our financial statements. We have also hired outside
      counsel to advise on the amendment of our previously filed annual and quarterly
      reports filed with the SEC.




Additionally
      we determined that the Company had ineffective controls over revenue
      recognition. Our remediation measures relating to revenue recognition include
      a
      review by management of revenue items other than normal sales and also the
      discontinuation of the operations of our Centerline Communications LLC
      subsidiary for which we have restated revenue.





In
      the
      second phase of the program, commencing with the filing of our restated
      financial statements, we will be implementing certain new policies and
      procedures such as:





a.  Seeking
      to recruit board members independent of management;




b.  Granting
      Board committees standing authority to retain counsel and special or expert
      advisors of their own choice;




c.  Seeking
      outside review of acquisition transactions





**Changes
      in Internal Control Over Financial Reporting**





Except
      as
      set forth above, there have been no changes in our internal control over
      financial reporting that occurred during the year ended December 31, 2005 that
      have materially affected or are reasonably likely to materially affect our
      internal control over financial reporting.





**Item
      8A(T). Controls and Procedures.**





Not
      applicable





**ITEM
      8B. OTHER INFORMATION**





BOARD
      APPOINTMENTS AND RESIGNATIONS





On
      August
      30, 2005, Leigh Coleman, a director of the Company, resigned effective August
      18, 2005. There were no disputes with the Company.




84





The
      Board
      of Directors appointed Jonathan Leinwand to the Board of Directors effective
      August 18, 2005. Mr. Leinwand is also our general counsel.





On
      September 16, 2005, the Company named Sir Christopher Meyer, KCMG, as Chairman
      of its Board of Directors. The appointment of Sir Christopher, 61, increased
      the
      number of independent Directors to three among a total of seven Board
      members.





On
      October 7, 2005, Przemyslaw Kostro resigned as a director of the Company. Mr.
      Kostro had no disputes with the Company.





On
      November 29, 2005, Mr. J. Randolph Dumas was appointed to the position of
      Executive Vice Chairman and Director. In this new function, Mr. Dumas will
      be
      expanding on his previous role as a joint venture partner in Sanswire
      Europe.





On
      December 8, 2005, Ms. Laina Raveendran Greene, a director of the Company,
      resigned her position on the Board of Directors effectively immediately, for
      personal reasons. Ms. Greene had no disputes with the Company.





On
      January 5, 2006, the Company announced the appointment of Michael P. Castellano
      to the Board of Directors. As an independent director, Mr. Castellano will
      fulfill the role as Chairman of GlobeTel’s Audit Committee as a qualified
      financial expert under Sarbanes-Oxley. He will also serve on GlobeTel’s
      Compensation and Nominating Committees.





On
      January 11, 2006, the Company announced the appointment of Dorian B. Klein
      to
      its Board of Directors. Mr. Klein also serves on GlobeTel's Audit, Compensation
      and Nominating Committees.





On
      February 17, 2006, the Company announced that Sir Christopher Meyer, its
      Non-Executive Chairman, had requested a change in his status, effective March
      19, 2006, to that of an Independent Director. As a result of his current
      professional obligations and commitments in the U.K., Sir Christopher had
      advised the Board that he felt unable to commit the time to the Chairmanship
      of
      GlobeTel that the company's shareholders had the right to expect.





On
      March
      20, 2006, Sir Christopher Meyer elected to step down completely from GlobeTel’s
      Board, after further considering the time that he had available to devote to
      the
      Company.





On
      March
      23, 2006, the Company announced that J. Randolph Dumas, Vice Chairman, has
      been
      elected Chairman of the Board of Directors, succeeding Sir Christopher Meyer,
      who remains with the Company as Chairman of the GlobeTel International Advisory
      Board.





**PART
      III**





**ITEM
      9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
      PERSONS**





**Name**
            
            **Age**
            
            **Position
                with Company**Jonathan
                Leinwand
            
            37
            
            Chief
                Executive Officer, DirectorPrzemyslaw
                Kostro
            
            45
            
            Chairman
                of the Board








All
      directors hold office until the next annual meeting of our stockholders and
      until their successors have been elected and shall qualify. Officers serve
      at
      the discretion of our Board of Directors.




**(During
                2005)**




**Name**
            
            **Age**
            
            **Position
                with Company**Timothy
                Huff (a)
            
            40
            
            Chief
                Executive Officer and DirectorPrzemyslaw
                Kostro
            
            42
            
            ChairmanJerrold
                Hinton (b)
            
            63
            
            DirectorLeigh
                Coleman (c)
            
            56
            
            Director,
                PresidentMitchell
                Siegel (d)
            
            58
            
            DirectorThomas
                Y. Jimenez (e)
            
            46
            
            Chief
                Financial OfficerMichael
                Molen (f)
            
            48
            
            DirectorKyle
                McMahan(g)
            
            47
            
            Director




(a)
            Resigned
                as Director and CEO October 7,
                2006.




85




(b)
            Resigned
                as Director February 8, 2005.(c)
            Resigned
                as an officer and Director August 18, 2005.(d)
            Retired
                as a Director June 21, 2006.(e)
            Retired
                as Chief Financial Officer on April 17, 2006.(f)
            Declined
                to stand for re-election and term ended August 11,
                2005.(g)
            Declined
                to stand for re-election as director and term ended on June 21,
                2006.




**Jonathan
      Leinwand**





Jonathan
      Leinwand, Chief Executive Officer and Director, joined GlobeTel as General
      Counsel in June 2005 and became a director in August 2005. He was appointed
      CEO
      in September 2007. Prior to joining GlobeTel, he was in private practice since
      1996 concentrating in the areas of corporate and securities law, representing
      a
      number of public companies. As part of his practice, Mr. Leinwand also served
      as
      a deal-maker for several US and foreign corporations arranging strategic
      alliances and funding both in the US and abroad. Mr. Leinwand graduated from
      the
      University of Miami with honors degrees in Political Science and Communications
      and graduated cum laude from the University of Miami School Of Law.





**Przemyslaw
      L. Kostro**





Przemyslaw
      L. Kostro, Chairman, was first elected to the Board of Directors in November
      2001. From November 2001 to April 2002, Mr. Kostro also served as the CEO of
      GlobeTel before relinquishing the position to Timothy Huff. Over the past five
      years, Mr. Kostro has been an attorney engaged in international law, and has
      been providing professional and consulting services to several large and
      mid-sized entities in Europe.  Mr. Kostro resigned as a Director in October
      2005 and was reappointed as Director and Chairman of the Board in October
      2006.





**Timothy
      M. Huff**





Timothy
      M. Huff, Director, Chief Executive Officer, joined GlobeTel in October 1999,
      and
      has served as CEO and as a member of the Board of Directors since April 2002.
      Prior to joining GlobeTel, Mr. Huff spent over five years owning and operating
      several successful private telecom companies. Mr. Huff has over eighteen years
      experience in international telecom business that included working with Sprint
      and MCI International, where he was involved in the construction of MCI's first
      international gateways. Mr. Huff resigned as Director and CEO on October 7,
      2006.





**Jerrold
      R. Hinton**





Jerrold
      R. Hinton, Director, has served on the Board of Directors since March 1995.
      He
      had previously served as Chief Executive Officer, President and Chairman of
      the
      Board from March 1995 to November 2001. Dr. Hinton, a graduate of Florida State
      University, holds bachelors, masters and doctorate degrees in management,
      engineering and real estate. From 1992 to early 1995, prior to joining the
      company, Dr. Hinton served as an officer of United Biomedical, Inc., a private
      company. Mr. Hinton resigned as a Director on February 8, 2005.





**Leigh
      Coleman**





Leigh
      Coleman, President, joined the Company in September 2003. Mr. Coleman was CEO
      of
      a major division for an internationally recognized Dutch public company based
      in
      the United States. In 2001, Mr. Coleman was CEO of an Australian public company
      specializing in IP PBX applications and CP equipment before joining GlobeTel.
      Mr. Coleman has a Masters in Business Administration, and has lectured in
      Strategic Management at Curtin University in Australia. He has focused on
      growing companies and international business development since 1986. Mr. Coleman resigned
      as an officer and Director on August 18, 2005.





**Mitchell
      A. Siegel**





Mitchell
      A. Siegel, Director, Chief Operating Officer, has served in this capacity and
      as
      a member of the Board of Directors since May 2002. Since 1996, he was a
      consultant to Global Transmedia Communications Corporation and was instrumental
      in defining our role as a licensed telecommunications company. Mr. Siegel
      graduated from American University, holding a Bachelors Degree in Business
      Administration and has completed Masters Degree courses in finance at City
      College of New York - Bernard Baruch School of Finance. Mr.
      Siegel retired as a Director on June 21, 2006.




86





**Thomas
      Y. Jimenez**





Thomas
      Y.
      Jimenez, CPA, Chief Financial Officer, has served as our CFO since joining
      the
      Company in October 1999. For the three years prior to joining the Company,
      Mr.
      Jimenez was a consultant to various telecommunications companies, running their
      financial department and assisted in building networks in different countries.
      Previously, Mr. Jimenez was a partner in certified public accounting firm in
      the
      New York City area. Mr. Jimenez graduated from Cleveland State University with
      a
      degree in Business Administration. Mr. Jimenez r etired
      as
      Chief Financial Officer on April 17, 2006.





**Michael
      Molen**





Michael
      Molen has served on our Board of Directors since May 2004. Since 1995, he has
      served in various capacities for Sanswire Technologies, Inc., including
      Chairman, Chief Executive Officer and Director. He currently serves as Chief
      Executive Officer of Sanswire Technologies, Inc. He was nominated to serve
      on
      the Company's Board of Directors in accordance with the terms of the Company's
      asset purchase agreement with Sanswire Technologies, Inc. Mr. Molen
      d eclined
      to stand for re-election and his term ended on August 11, 2005. Mr. Molen
      declined to stand for re-election and his term ended August 11,
      2005.





**Kyle
      McMahan**





Kyle
      McMahan has served on our Board of Directors since May 2004. From 1989 to 2003,
      Mr. McMahan served as Chief Executive Officer of Southern Mortgage Reporting,
      Inc., a credit-reporting agency. From April 2001 through September 2003, he
      served as chairman of INFO 1 Co., Inc., a company that organized, planned and
      financed the startup of new businesses in the credit reporting industry. Mr.
      McMahan has served as a board member of The Mortgage Bankers Association of
      Georgia and The National Credit Reporting Association. He has been nominated
      to
      serve on the Company's Board of Directors in accordance with the terms of the
      Company's asset purchase agreement with Sanswire Technologies, Inc. Mr. McMahan declined
      to stand for re-election as director and term ended on June 21,
      2006.





(B)
      COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT


Section
      16(a) of the Securities Exchange Act of 1934 requires that our officers and
      directors, and persons who own more that ten percent of a registered class
      of
      our equity securities, to file reports of ownership and changes in ownership
      with the Securities and Exchange Commission and with any exchange on which
      the
      Company's securities are traded. Officers, directors and persons owning more
      than ten percent of such securities are required by Commission regulation to
      file with the Commission and furnish the Company with copies of all reports
      required under Section 16(a) of the Exchange Act. Based solely upon our review,
      we did not disclose any failures to file reports under Section 16(a) of the
      Exchange Act.





The
      audit
      committee consists of three directors of which one, Michael Castellano, is
      a
      financial expert under Sarbanes-Oxley and the two directors, Dorian Klein and
      Kyle McMahan are independent directors. Mr. Castellano also fulfills an
      important role as Chairman of GlobeTel's separately designated Audit Committee.
      Mr. Castellano succeeds Laina Raveendran Greene, who stepped down from the
      Board
      in December 2005 for personal reasons.





87





**ITEM
      10. EXECUTIVE COMPENSATION.**





Name
                & Principal Position
            
            Year
            
            Salary
                ($)
            
            Bonus
                ($)
            
            Stock
                Awards
              ($)
            
            Option
                Awards ($)
            
            Non-Equity
                Incentive Plan Compensation ($)
            
            Change
                in Pension Value and Non-Qualified Deferred Compensation Earnings
                ($)
            
            All
                Other Compensation ($)
            
            Total
                ($)Timothy
                M. Huff, CEO
            
            
            2005
            
            
            200,000
            (a)
            
            0
            
            
            0
            
            
            2,288,390
            (b,e)
            
            0
            
            
            0
            
            
            50,000
            (d)
            
            2,538,390Timothy
                M. Huff, CEO
            
            
            2004
            
            
            200,000
            (a)
            
            0
            
            
            0
            
            
            1,618,394
            (b,e)
            
            0
            
            
            0
            
            
            18,750
            (d)
            
            1,837,144Timothy
                M. Huff, CEO
            
            
            2003
            
            
            175,000
            (a)
            
            0
            
            
            112,500
            
            
            0
            
            
            0
            
            
            0
            
            
            134,167
            (f)
            
            421,667Mitchell
                A. Siegel, COO
            
            
            2005
            
            
            120,000
            (a)
            
            0
            
            
            0
            
            
            3,988,093
            (b,e)
            
            0
            
            
            0
            
            
            55,000
            (d)
            
            4,163,093Mitchell
                A. Siegel, COO
            
            
            2004
            
            
            175,000
            (a)
            
            0
            
            
            0
            
            
            1,120,596
            (b,e)
            
            0
            
            
            0
            
            
            18,750
            (d)
            
            1,314,346Mitchell
                A. Siegel, COO
            
            
            2003
            
            
            150,000
            (a)
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            191,667
            (f)
            
            341,167Thomas
                Y. Jimenez, CFO
            
            
            2005
            
            
            120,000
            (a)
            
            0
            
            
            0
            
            
            1,256,695
            (b,e)
            
            0
            
            
            0
            
            
            55,000
            (d)
            
            1,431,695Thomas
                Y. Jimenez, CFO
            
            
            2004
            
            
            175,000
            (a)
            
            0
            
            
            0
            
            
            884,197
            (b,e)
            
            0
            
            
            0
            
            
            14,063
            (d)
            
            1,073,260Thomas
                Y. Jimenez, CFO
            
            
            2003
            
            
            150,000
            (a)
            
            0
            
            
            57,500
            
            
            0
            
            
            0
            
            
            0
            
            
            111,667
            (f)
            
            318,667Stephen
                King, Sr. VP
            
            
            2005
            
            
            47,682
            (a)
            
            0
            
            
            0
            
            
            143,338
            (b)
            
            0
            
            
            0
            
            
            12,500
            (d)
            
            203,520Lawrence
                E. Lynch, COO
            
            
            2005
            
            
            120,000
            (a)
            
            0
            
            
            0
            
            
            881,547
            (b,e)
            
            0
            
            
            0
            
            
            55,000
            
            
            1,056,547Lawrence
                E. Lynch, Sr. VP Since August 2004
            
            
            2004
            
            
            37,500
            (a)
            
            0
            
            
            0
            
            
            37,500
            (b)
            
            0
            
            
            0
            
            
            0
            
            
            75,000Joseph
                Seroussi, CTO
            
            
            2005
            
            
            120,000
            (a)
            
            0
            
            
            0
            
            
            881,547
            (b,e)
            
            0
            
            
            0
            
            
            55,000
            
            
            1,056,547Joseph
                Seroussi, CTO Since Novemeber 2004
            
            
            2004
            
            
            25,000
            (a)
            
            0
            
            
            192,000
            
            
            504,048
            (b,e)
            
            0
            
            
            0
            
            
            0
            
            
            721,048Jerrold
                R. Hinton, Director/Former President
            
            
            2005
            
            
            0
            
            
            0
            
            
            0
            
            
            331,398
            (e)
            
            0
            
            
            0
            
            
            100,000
            (d)
            
            431,398Jerrold
                R. Hinton, Director/Former President
            
            
            2004
            
            
            0
            
            
            0
            
            
            192,000
            
            
            472,798
            (e)
            
            0
            
            
            0
            
            
            18,750
            (d)
            
            683,548Jerrold
                R. Hinton
              Director/Former
                President
            
            
            2003
            
            
            100,000
            (a)
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            100,000Leigh
                A. Coleman
            
            
            2005
            
            
            49,220
            (a)
            
            0
            
            
            0
            
            
            72,417
            (b)
            
            0
            
            
            0
            
            
            0
            
            
            121,637Leigh
                A. Coleman President Since June 2004
            
            
            2004
            
            
            70,780
            (a)
            
            0
            
            
            0
            
            
            597,798
            (b,e)
            
            0
            
            
            0
            
            
            50,031
            (d)
            
            718,609Jonathan
                Leinwand, Secretary
            
            
            2005
            
            
            95,262
            
            
            0
            
            
            0
            
            
            142,188
            (e)
            
            
            
            
            
            
            
            18,750
            (d)
            
            256,200Vivian
                Manevich, CAO Through Dec. 2002
            
            
            2005
            
            
            0
            (c)
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0Vivian
                Manevich, CAO Through Dec. 2002
            
            
            2004
            
            
            0
            (c)
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0Vivian
                Manevich, CAO Through Dec. 2002
            
            
            2003
            
            
            0
            (c)
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0




a)
      Effective January 1, 2002, GlobeTel entered into a three-year employment agreements
      with its key management. Effective 2005, the agreements were renewed automatically
      on a year-to-year basis.




88





For
      the
      year 2002, the agreements provided for annual compensation of $150,000 for
      its
      Chief Executive Officer (CEO), $125,000 each for its Chief Financial Officer
      (CFO) and Chief Operating Officer (COO) and $75,000 each for its Chief Administrative
      Officer (CAO) and VP of Network Operations. Further, there remained
      an employment contract with its former President, as described below, which
      called for a salary of $100,000 per annum through 2003.





In
      2003,
      the base compensation increased to $175,000 for its CEO, $150,000 each for
      its
      CFO and COO, $90,000 each for its CAO and VP of Network Operations.





In
      2004,
      the base compensation increased to $200,000 for its CEO, $175,000 each for
      its
      CFO and COO, $120,000 for the Controller (formerly the CAO) and $110,000 for
      its
      VP of Network Operations. Also, GlobeTel hired a new President at an annual
      compensation of $125,000 in June 2005, a Senior Vice President (Sr. VP) at
      an
      annual compensation of $100,000 in August 2005, and a Chief Technology Officer
      (CTO) at an annual compensation of $125,000 in November 2005.





Accrued
      but unpaid base compensation of $82,500 for the CEO, $57,500 for the CFO and
      $58,333 for the COO (a total of $198,333) were owed as of December 31, 2004. These
      amounts were paid in January 2005.





In
      2005,
      the base compensation remained at $200,000 for its CEO. The CFO, COO, CTO
      and
      General Counsel all had base compensation of $175,000. The Company also entered
      into employment contracts with the Executive Vice Chairman (EVC) and Senior
      Vice President (SVP) of Finance. The EVC agreement called for annual salaries
      of $250,000 plus signing bonuses equal to 2.5% of the outstanding shares
      of
      the company as of December 31, 2005. The EVC is also entitled to stock salary
      in
      stock options totaling $750,000 per year for three years at $1.21 per share.
      The SVP Finance agreement calls for annual salaries of $195,000 plus bonuses
      amounting to 2% of the outstanding shares of the Company's stock at the end
      of
      the year, payable in the form of stock options.




89





(b)
      In
      addition to the base compensation, the employment agreements provide for payment
      of bonuses that at a minimum equal the executives' base compensation, unless
      otherwise agreed to by the executives. As of December 31, 2003 and 2002, the
      executives all agreed not to receive bonuses they are entitled to pursuant to
      the
      employment agreements. For 2004, the executives received bonuses as entitled
      to under the agreements. The bonuses received were equal to the amount of
      gross
      compensation received during 2004. All executive bonuses for 2004 were included
      in the Employee Stock Option Plan (see Note 26 to financial statements) and
      paid
      with stock options.





In
      2005,
      the bonuses were awarded at the recommendation of management and approved
      by the board of directors. All executive bonuses for 2005 were included in
      the
      Employee Stock Options Plan and paid with stock options.





(c)
      Vivian Manevich served as the CAO through 2002. Thereafter, Ms. Manevich accepted
      a non-executive position in the Company, and, accordingly, any and all compensation
      for 2003, 2004 and 2005 was included in employee payroll and none of
      her
      compensation was included in executive compensation.





(d)
      In
      2005, The Company's Directors received stipends of $6,250 per quarter. The
      CFO,
      COO and SVP of Finance who are required to attend and present to the board
      receive stipends of $3,125 per quarter. The Chairman of the Board has stipends
      of $25,000 per quarter.





Non-executive
      directors' stipends were paid with cash, while executive directors'
      stipends were paid in stock options. Further, the board members approved
      the issuance of bonuses to the members at the end of the year amounting to
      100%
      of the stipends earned during the year, which were paid in stock options.





In
      2004,
      the then Chairman received additional stock compensation of $425,000, for
      services rendered providing assistance in expanding our business and services
      world-wide and in obtaining funding for us.





(e)
      Pursuant to an Officers' Stock Option Grant plan approved by the Board (see Note
      22
      to financial statements), certain officers are entitled to receive stock options
      in amounts which, after the exercise of such options, would effect ownership
      of various percentages of the total shares then issued and outstanding.
      The following officers received options for restricted shares in the
      following percentages for 2005: CEO - 3%, former COO and current SVP - 2%, CFO
      -
      1.5%, current COO - 1%, CTO - 1%, SVP of Finance - 2% and General Counsel -
      .75%.





The
      schedule below indicates the number of shares received upon exercise and the
      aggregate dollar value realized upon exercise in 2005 by officers and directors
      pursuant to the above plans.





NAME
            
            POSITION
            
            SHARES
              EXERCISE
              (POST-SPLIT)
            
            VALUATIONHUFF,
                TIMOTHY
            
            Chief
              Executive Officer/ Director
            
            
            500,000
            
            $
            900,000COLEMAN,
                LEIGH A
            
            Former
              President
            
            
            211,734
            
            $
            381,121JIMENEZ,
                THOMAS Y
            
            Chief
              Financial Officer
            
            
            280,216
            
            $
            504,389SIEGEL,
                MITCHELL A
            
            Senior
              VP/Director
            
            
            369,022
            
            $
            664,240LYNCH,
                LAWRENCE E
            
            Chief
              Operating Officer
            
            
            12,897
            
            $
            29,020SEROUSSI,
                JOSEPH
            
            Chief
              Technical Officer
            
            
            172,065
            
            $
            309,717HINTON,
                JERROLD
            
            Former
              President/ Former Director
            
            
            100,000
            
            $
            180,000MOLEN,
                MICHAEL
            
            Former
              Director
            
            
            8,715
            
            $
            15,687TOTAL
                - OFFICERS & DIRECTORS
            
            
            
            
            
            1,654,649
            
            
            2,984,174




90




**OUTSTANDING
      EQUITY AWARDS**




**Option
                Awards**
            
            **Stock
                Awards**Name
            
            Number
              of
              Securities
              Underlying
              Unexercised
              Options
                (#)
              Exercisable
            
            Number
              of
              Securities
              Underlying
              Unexercised
              Options
                (#)
              Unexercisable
            
            Equity
                Incentive
              Plan
                Awards:
              Number
                of
              Securities
                Underlying
              Unexercised
              Unearned
              Options
                (#)
            
            Option
              Exercise
              Price
              ($)
            
            Option
              Expiration
                Date
            
            Number
              of
                Shares
              or
                Units
              of
                Stock
              That
                Have Not
              Vested
                (#)
            
            Market
              Value
                of
              Shares
                or
              Units
                of
              Stock
                That Have Not Vested ($)
            
            Equity
                Incentive
              Plan
                Awards:
              Number
                of
              Unearned
                Shares, Units or Other Rights That Have Not Vested (#)
            
            Equity
                Incentive
              Plan
                Awards:
              Market
                or Payout
              Value
                of Unearned
              Shares,
                Units or
              Other
                Rights
              That
                Have Not Vested ($)Timothy
                Huff
            
            
            1,782,964
            
            
            
            
            
            
            
            
            0.675
            
            December
              31, 20061,647,442
            
            
            
            
            
            
            
            
            0.675
            
            December
              31, 2007116,527
            
            
            
            
            
            
            
            
            0.675
            
            April
              1, 2007Thomas
                Jimenez
            
            
            633,842
            
            
            
            
            
            
            
            
            0.675
            
            December
              31, 2006877,810
            
            
            
            
            
            
            
            
            0.675
            
            December
              31, 2007Jerrold
                Hinton
            
            
            1,577,367
            
            
            
            
            
            
            
            
            0.675
            
            December
              31, 2006569,416
            
            
            
            
            
            
            
            
            0.675
            
            December
              31, 2007Mitchell
                Siegel
            
            
            851,853
            
            
            
            
            
            
            
            
            0.675
            
            December
              31, 20061,093,113
            
            
            
            
            
            
            
            
            0.675
            
            December
              31, 2007Leigh
                Coleman
            
            
            133,333
            
            
            
            
            
            
            
            
            0.675
            
            December
              31, 2006574,438
            
            
            
            
            
            
            
            
            0.675
            
            December
              31, 2007




**COMPENSATION
      OF DIRECTORS**





**DIRECTOR
                COMPENSATION**Name
            
            Fees
                Earned or Paid in Cash
              ($)
            
            Stock
                Awards ($)
            
            Option
                Awards ($)
            
            Non-Equity
                Incentive
              Plan
                Compensation
              ($)
            
            Non-Qualified
                Deferred Compensation Earnings
              ($)
            
            All
              Other
                Compensation ($)
            
            Total
                ($)(a)
            
            (b)
            
            (c)
            
            (d)
            
            
            
            (f)
            
            (g)
            
            (j)Sir
                Christopher Meyer, Chairman (2005)
            
            
            
            
            
            
            
            
            25,000
            
            
            
            
            
            
            
            
            
            
            
            25,000J.
                Randolph Dumas, Vice Chairman (2005)
            
            
            62,500
            
            
            4,397,097
            
            
            6,250
            
            
            
            
            
            
            
            
            
            
            
            4,465,847Przemyslaw
                L. Kostro, Former Chairman (2005)
            
            
            
            
            
            
            
            
            18,750
            
            
            
            
            
            
            
            
            
            
            
            18,750Przemyslaw
                L. Kostro, Chairman (2004)
            
            
            
            
            
            
            
            
            443,750
            
            
            
            
            
            
            
            
            
            
            
            443,750Przemyslaw
                L. Kostro, Chairman (2003)
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            0Laina
                Green (2005)
            
            
            —
            
            
            85,575
            
            
            19,000
            
            
            —
            
            
            —
            
            
            
            
            
            104,575Michael
                Molen (2005)
            
            
            —
            
            
            —
            
            
            18,520
            
            
            —
            
            
            —
            
            
            
            
            
            18,520Michael
                Molen (2004)
            
            
            —
            
            
            —
            
            
            18,750
            
            
            —
            
            
            —
            
            
            
            
            
            18,750Kyle
                McMahan(2005)
            
            
            —
            
            
            —
            
            
            25,000
            
            
            —
            
            
            —
            
            
            
            
            
            25,000Kyle
                McMahan(2004)
            
            
            —
            
            
            —
            
            
            18,750
            
            
            —
            
            
            —
            
            
            
            
            
            18,750




Compensation
      paid to Directors who are also officers of the Company is reflected in Item
      10.
      Executive Compensation.




91





We
      maintain a policy of compensating our directors using cash and stock options.
      Currently, the Company determines Board compensation on an individual basis.
      Employee members of the Board do not receive additional compensation for their
      service on the Board.





**ITEM
      11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS.**





**Common
      Stock**





At
      October 17, 2007, we had 127,749,688  common
      shares issued and outstanding (taking into account the 1 for 15 reverse split
      on
      May 23, 2005). The table below sets forth the share ownership of our executive
      officers and directors, individually and as a group. No other person is the
      beneficial owner of more than 5% of our issued and outstanding common
      shares





Title
                of Class
            
            Name
                & Address of
              Beneficial
                Ownership
            
            Amount
                and
              Beneficial
            
            Nature
                of
              Ownership
            
            Percentage
              of
                Class (1)Common
                Stock
            
            Przemyslaw
                L. Kostro Chairman
              101
                NE 3rdAve, Suite 1500, Fort Lauderdale, Florida 33301
            
            9,211,385
            
            Shares
            
            7.25
            %Common
                Stock
            
            Jonathan
                Leinwand, CEO Since October 2007 and Director Since August
                2005
              101
                NE 3rdAve, Suite 1500, Fort Lauderdale, Florida 33301
            
            1,420,000
            
            Shares
            
            1.1
            %Total
                of all Officers and Directors as a Group
            
            10,631,385
            
            
            
            9.35
            %





(1)
      Based
      on 127,749,688  shares
      issued and outstanding on October 17, 2007.





**ITEM
      12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.**





See
      Item
      7, Notes 25 and 26 Common Stock Transactions and Stock Option, respectively,
      to
      the Notes to Consolidated Financial Statements.





**ITEM
      13. PRINCIPAL ACCOUNTANT FEES AND SERVICES**





AUDIT
      FEES





Dohan
      and
      Company CPAs billed approximately $66,303 for professional services rendered
      for
      the audit of our annual financial statements for fiscal year 2005. This also
      included reviews of the financial statements included in our Forms 10-Q for
      the
      fiscal year and assistance in filing various proxy statements. For fiscal year
      2004, the amount paid for the same services was $74,024. Dohan
& Company has estimated the fees associated with their review of the
      restated financial statements will be $10,000.





The
      above
      fees were pre-approved by the audit committee based on estimated budgets
      presented to the audit committee.





**ITEM
      14. EXHIBITS**





(A)
      EXHIBITS




EXHIBIT
                NO.
            
            DESCRIPTION3.1
            
            Articles
                of Incorporation (filed as Exhibits 3.1, 3.2 and 3.3 to the Company's
                Registration Statement on Form 10-SB and incorporated herein by
                reference)3.2
            
            Bylaws
                (filed as Exhibit 3.4 to the Company's Registration Statement on
                Form
                10-SB and incorporated Herein by reference)Material
                Contracts-Consulting Agreements and Employment Agreements (filed
                as
                Exhibits to Registration 10.1 Statements on Form S-8 and post-effective
                amendments thereto and incorporated herein by
                reference)10.1
            
            Asset
                Purchase Agreement between the Company and Sanswire, Inc.(incorporated
                by
                reference)10.2
            
            Asset
                Purchase Agreement between the Company and Stratodyne,Inc. (incorporated
                by reference)10.3
            
            Subscriptions
                Agreements between the Company and Preferred Series A,B,C, and D
                shareholders (incorporated by reference)31.1
            
            Certification
                of Chief Executive Officer, Principal Financial Officer and Principal
                Accounting Officer required by Rule 13a-14(a)/15d-14(a)32.1
            
            Certification
                of Chief Executive Officer, Principal Financial Officer and Principal
                Accounting Officer Pursuant to 18 U.S.C. Section 1350, As Adopted
                Pursuant
                to Section 906 of the Sarbanes-Oxley Act of
                2002.





92


**SIGNATURES**





In
      accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
      this report to be signed on its behalf by the undersigned, thereunto duly
      authorized.


**GLOBETEL
                COMMUNICATIONS CORP.**By:
            /s/
              Jonathan LeinwandName:Jonathan
                Leinwand,
              Title:Chief
                Executive Officer (Principal Executive Officer)Dated:December
                4, 2007





In
      accordance with the requirements of the Exchange Act, the registrant has caused
      this report to be signed on its behalf by the undersigned, thereunto duly
      authorized.




SIGNATURE
            
            TITLE
            
            DATE/s/
                Jonathan Leinwand
              Jonathan
                Leinwand
            
            Chief
                Executive Officer, Principal Financial
              Officer
                and Director
            
            December
                4, 2007/s/Przemyslaw
                Kostro
              
              Przemyslaw
                Kostro
            
            Chairman
                of the Board
            
            December
                4, 2007





93