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

                                    FORM 10-K

(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

[_] 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             [I.R.S. Employer Identification No.]
incorporation or organization)

            9050  Pines Blvd. Suite 110 Pembroke Pines, Florida 33024
            ---------------------------------------------------------
           (Address of Principal Executive Offices) (Zip Code)

           Issuer's telephone number: (954) 241-0590

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

Common Stock Par Value $.00001 per share    AMEX (American Stock Exchange)
----------------------------------------    ------------------------------
Title of each class                         Name of exchange on which registered

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

          ___________________________________________________________
                                (Title of class)

      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. |X| No: |_|

      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. |_|

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

      Yes |_| No: |X|


                                       1
<PAGE>
State issuer's revenues for its most recent fiscal year ended December 31, 2005:
$81,143,838.

As of March 2, 2006, there were 102,808,081  shares of the issuer's common stock
issued and  outstanding.  Affiliates of the issuer own  9,631,393  shares of the
issuer's issued and outstanding common stock and the remaining 93,176,688 shares
are held by  non-affiliates.  The  aggregate  market value of the shares held by
non-affiliates at March 2, 2006, was $265,904,983.

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 |_| No |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

Item No.                                                            Page
------------------------------------------------------------------------

PART I

Item 1.    Business                                                    3

Item 1A.   Risk Factors                                               11

Item 2.    Properties                                                 12

Item 3.    Legal Proceedings                                          12

Item  4.   Submission of Matters to a Vote of Security Holders        13


PART II

Item 5.    Market for Registrant's Common Equity, Related
           Stockholder Matters and Issuer Purchases of
           Equity Securities                                          14

Item 6.    Management's Discussion and Analysis of
           Financial Condition and Results of Operation               16

Item 7.    Financial Statements and Supplementary Data                22

Item 8.    Changes in and Disagreements with
           Accountants on Accounting and Financial Disclosure         69

Item 8A.   Controls and Procedures                                    69

Item 8B.   Other Information.                                         70


PART III

Item 9.    Directors and Executive Officers of the Registrant         71

Item 10.   Executive Compensation                                     73

Item 11.   Security Ownership of Certain Beneficial Owners and
           Management and Related Stockholder Matters                 75

Item 12.   Certain Relationships and Related Transactions             76

Item 13.   Principal Accountant Fees and Services                     76


PART IV

Item 14.   Exhibits and Financial Statement Schedules                 76


                                       2
<PAGE>
                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

General

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

On 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.

GlobeTel is authorized to issue up to  150,000,000  shares of Common Stock,  par
value $0.00001 per share,  and 10,000,000  shares of Preferred  Stock, par value
$0.001.  There were  1,500,000,000  authorized  pre-split  shares.  Upon reverse
split, they became 100,000,000  authorized shares, and subsequently increased to
150,000,000 in August 2005.

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 26.

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 Banco Azteca and Marcatel, as discussed herein.
GlobeTel   is   currently   pursuing   other   opportunities   with   additional
telecommunications   partners  in  Mexico.  In  2004,  we  formed   wholly-owned
subsidiaries:  Sanswire Networks, 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.  In 2005, we
incorporated  High  Valley  Property  Ltd.  to  create  a  holding  company  for
international  businesses,  as well as  Globetel  Wireless  Corp.  and  Globetel
Wireless Europe GmbH to enable a faster  deployment of our wireless networks and
activities across Europe and on a global scale.

In 2004, we acquired a 73.15% interest in Consolidated Global Investments,  Ltd.
(CGI), formerly known as Advantage Telecommunications, Ltd. (ATC), an Australian
company.  In December  2005, we sold our holdings back to CGI,  returning all of
our shares and options in CGI,  and  retaining a deposit of  approximately  $1.4
million that was held for CGI.

Business of GlobeTel

We are a  telecommunications  and  financial  services  company with a broad and
expanding range of both current and  contemplated  services,  product lines, and
projects as described  below.  Our core  products and  services  are:  telephony
services  that  include  international  wholesale  carrier  traffic,   networks,
enhanced services - prepaid calling services and IP Telephony. Our non-telephony
products and services include:  Stored Value Card Programs and outsourced stored
value services for the international banking and  telecommunications  community.
Our Super Hub(TM) network is currently in development and it is our intention to
deploy  the  Stratellites  as the most  efficient  and cost  effective  means of
interconnecting the Super Hub(TM) network.


                                       3
<PAGE>

In our  efforts to be on the cutting  edge or pioneers in the  telecommunication
industry,  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.

Super Hubs(TM)

We have  consolidated our operations on the development of the Super Hub(TM) and
its  application in the maturing  foreign  markets  utilizing  VoIP  technology.
Further,   we  have  limited  our   activities  in  some  markets  to  focus  on
opportunities with greater margins.

Each Super  Hub(TM)  will be  interconnected  and  equipped to provide  one-stop
shopping for quality voice and data communications.  The Super Hub(TM) makes the
network  unique  in its  design.  It  will  not be  built  on the  conventional,
hub-and-spoke   connection  but  will  instead   follow  a  high   connectivity,
multi-route design only available by using IP.

Our intention is to use the Stratellites (discussed below) as the most efficient
and cost-effective means of interconnecting our Super Hubs(TM).

International Wholesale Carrier Traffic

The business of International Wholesale Carrier traffic is a business whereby we
buy and we sell large blocks of calling minutes with particular  origination and
termination points. In some instances, we 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 purchase a bulk package of minutes to specific  destinations and
then resell  these  minutes in smaller  quantities  to  individual  and business
customers.  In most  instances,  our customers  prepay 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 and  international
carrier traffic  immediately began to ramp up on the networks.  In June of 2005,
we consolidated all of the telecommunication equipment from our Hong Kong switch
into our new switch in Los Angeles, California.  Centerline's switch facility in
Los  Angeles  is now  fully  operational.  There  is  currently  no  anticipated
expansion  other  than some  necessary  VoIP  equipment  that will be  required.
Centerline's TDM switch - a Nortel DMS-250 SuperNode - has sufficient capability
to handle all of the capacity  necessary to achieve $10 million in gross monthly
revenues, or approximately 250 million minutes per month.

Networks

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

When we 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.

A virtual  network is limited to the amount of traffic it can  handle.  When the
limit begins to be approached,  we make  arrangements  with one of several major
Internet service providers who maintain a physical  connection  between the hubs
in the  form of a leased  high  speed  line.  Leased  lines  have  much  greater
traffic-carrying  capacity than virtual  networks.  We are  immediately  able to
handle a greater volume of calls than the virtual network allows.

We also provide network management services to customers, which includes testing
routes, troubleshooting and service requests.

GlobeTel VoIP

On October 7,  2005,  we  announced  the launch of our  flexible,  private-label
consumer VoIP platform  designed and built  specifically for service  providers.
The completely  customizable  solution known as StrateVoIP  provides  everything
required to turn an existing  service  provider into a leader in VoIP technology
without  the usual  obstacles  involved  in building  out a  carrier-class  VoIP
platform.  StrateVoIP  is a  private-label  solution  designed  for ISPs,  cable
companies,  telcos,  and all other providers  desiring to offer VoIP services to
their local markets.  The StrateVoIP  platform is operated using our proprietary
VoIP software package,  which allows clients to design and architect  completely
customized  calling  packages to fit the needs of their  specific local markets.
With the  StrateVoIP  platform  clients can utilize  their own brand,  deliver a
single bill and provide direct customer  support to its customers.  StrateVoIP's
web  administered MIS platform  provides each client with an integrated,  tested
and  operational  telephony  service,  which  includes  StrateVoIP's  customized
network operations support systems,  managed switching  platforms,  live network
interfaces,  and IP and TDM carrier interconnects.  StrateVoIP provides a unique
sales and marketing  strategy via the customizable  platform which provides real
time web-based functionality, enabling clients to set up custom calling plans by
country or region with customized rate management for profitability control. The
consumer  experience is powered by a variety of devices  including  wireless and
broadband based VoIP hardware which is completely plug and play, while providing
advanced  calling  features such as real-time  accounting,  web and  email-based
voicemail, and global "follow-me" services.  StrateVoIP has focused on the Latin
American  market and began initial  testing and  deployment in Brazil during the
fourth quarter. Together with our Brazilian partners, the StrateVoIP platform is
in late stages of testing.  The retail  service will be rolled out  initially in
Brazil followed by expansion into the Latin American region.


                                       4
<PAGE>
Stored Value Services

In late 2003,  we began  offering new  products  and services  which we call the
MagicMoney(R)   program.  The  features  of  the  MagicMoney(R)   program  allow
telecommunications  companies and financial  institutions  worldwide to add true
stored value services to their existing products and create new products,  while
maintaining the  convenience,  security,  and  acceptability  of a MasterCard or
Visa.  MagicMoney(R)  stored value services include:  prepaid  long-distance and
international calling services,  debit card "electronic bank accounts" and funds
sharing services.

We developed  the  MagicMoney(R)  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 make our product unique are 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 are offered  anywhere  the Maestro and
Cirrus  logos are  found,  which  covers  between 5 - 8  million  merchants  and
approximately 1 million ATMs around the world.

Currently, our programs are geared towards Latin American,  Indian, Filipino and
Asian market segments  linking their overseas family members to home. One of our
key goals is 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.

We are  presently  working  on a number  of  MagicMoney(R)  projects.  By having
developed  a   comprehensive   stored   value   services   platform  and  system
infrastructure we are 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  are  now  recognized  as "an  enabler"  of  stored  value  applications  and
technology.  Our suite of stored value applications aid firms with existing card
programs and bring to them flexibility to add ancillary services to their cards.
These  ancillary  services  help firms  create new profit  centers  from current
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 define our
paradigm shift.

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.

Enhanced Services - PrePaid Calling Services

Our  enhanced  services use  proprietary  software  that  operates on our switch
interconnected with various customer networks. Pre-paid calling services are the
most widely used enhanced  service.  Our prepaid calling  services allow 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 are  focusing on prepaid  calling  services  and  outsourcing  the use of our
enhanced services switch. We are 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.

Agreement with Financial Software & Systems in India

On  November  9,  2005,  we  announced  that we have  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.  The Company is
confident that partnership with FSS will provide significant  advantages to both
organizations.


                                       5
<PAGE>
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.

GlobeTel Wireless, Russian Joint Venture Agreement

As of December 30, 2005,  GlobeTel  Wireless  Corp.  ("GTEW") had entered into a
binding  agreement  to install  wireless  communications  networks  in 30 cities
throughout  the  Russian  Federation,   providing   broadband,   VOIP  and  DECT
technologies.   GTEW  had  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%  interest  in the  operations  of the
network,  allowing  the Company to enjoy the 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.

Updates of Disclosed Stored Value Service Agreements & Programs

Banco Azteca Letter of Intent

In February  2005,  we signed a Letter of Intent  (LOI) with Banco  Azteca,  the
fifth largest financial  institution in Mexico.  The agreement with Banco Azteca
would have further  cemented our position in Mexico  serving the Latin  American
Market  Segment.  The company was working  with Banco Azteca to initiate a stage
development  that would have  enabled 2.5 million  existing  Banco  Azteca debit
cards to be used for  prepaid  calling.  However,  based on the  business  terms
presented, the company has decided not to move forward with this deal.

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  are  presently  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 are working with Bankcard on technical and systems integration.  Creative and
program development is now underway for the co-branded card design,  program and
marketing development. Having had the opportunity to address and resolve certain
legal issues  relating to Philippine  law and United States legal and regulatory
compliance,  we were slated to perform the initial launch of this program during
the first quarter of 2006, however, due to additional  regulatory  requirements,
the launch as been rescheduled for second quarter of 2006.


                                       6
<PAGE>
Globe Telecom Memorandum of Agreement

In October  2004,  we signed a  Memorandum  of Agreement  (MOA) with  Philippine
mobile giant Globe  Telecom  (Globe) 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  is to allow  the  Company's  stored  value  cardholders  to send  money
directly to family and friends through their Globe Mobile Phone  (G-Cash).  With
this new technology,  the SMS/text recipient is then able to withdraw funds from
major  Filipino  retail  outlet  chains.  Globe  Telecom is the  second  largest
cellular phone operator in the Philippines with over 10 million subscribers. The
Company is at the end  stages of testing  the  software  application  to support
G-Cash. Due to regulatory requirements,  the project has experienced delays. The
Company is currently in  negotiations  with several banks who are  interested in
participating in the program during fiscal year 2006.

Equitable Card Letter of Understanding

In August 2004, we signed a Letter of  Understanding  (LOU) with  Equitable Card
Network, Inc. for Equitable to enable the Company to issue GlobeTel branded VISA
Electron Cards in the Philippines.  We were working with Equitable to define the
nature,  type and scope of the  relationship  we will be  forming  to issue VISA
Electron  cards in the  Philippines.  However,  based  upon the  business  terms
presented, we will not be moving forward with this deal.

Pier One Filipino Seafarers Union

In July 2004,  we entered into an agreement  with Pier One to develop our Stored
Value Card Program for  seafarers.  The  "Lighthouse  Card" will allow  Filipino
seafarers to load and remit cash from overseas at special  rates.  Corresponding
Lighthouse  cardholders in the  Philippines can then withdraw money from any ATM
in the Philippines  and access their account from most locations  throughout the
world.   This  program  has  been  put  on  hold  pending  further  research  of
requirements under Maritime Law.

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  our  Stored  Value  Program  for  use  by  its  members  in  Japan.  FC
Professional represents  approximately 40,000 Filipino workers in Japan. Because
of the  difficulty  in providing  this service in Japan,  we have decided not to
continue pursuing this opportunity at this time.

OnQ Program

In July 2004,  we  announced  the  launching of our Stored Value Card Program in
Australia,  Bill Express,  through the  Australian  distributor,  OnQ, with over
8,000 points of sale throughout  Australia.  The new prepaid debit style product
was designed to provide a customer with a convenient alternative to cash that is
secure and easy to  manage.  Due to  unfavorable  business  conditions,  we have
decided to pursue other POS solutions with another vendor.

Timesofmoney.com Memorandum of Understanding

In September  2004, we entered into a Memorandum of  Understanding  ("MOU") 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.
TimesofMoney.com is a comprehensive, online financial super mall, founded by The
Times of India Group,  the largest media group in India.  It hosts the offerings
of  best-in-class  banks and financial  institutions  and its product  portfolio
spans credit  cards,  loans,  mutual  funds,  tax filing and NRI  services.  The
company is a leading  financial  portal and has  emerged as the  backbone of the
Banking  Industry for online  remittances.  Based upon our recent agreement with
FSS, we will not be going forward with this program.

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.  Through  Englewood and its  subsidiaries  carrier
traffic,  foreign termination and stored value card processing capabilities were
underway.  However,  due  to the  migration  of the  wholesale  carrier  traffic
business to our subsidiary  Centerline  Communications  (switch  facility in Los
Angeles),  we have  decided  not to pursue the carrier  business  aspect of this
deal.  Englewood  has continued to assist the company in  identifying  potential
clients  on the  debit  card  business  and is  providing  support  with  the IP
telephony business.


                                       7
<PAGE>
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 GTE stored value card  programs  around the
world, as well as other third party cards. Both parties will contribute  equally
to the operation of the Miami switch.  The switch is expected to be certified to
process   MasterCard,   Visa,   Cirrus,   and  other   independent  ATM  network
transactions.   The  switch  will  be  installed  and  integrated  by  Englewood
Corporation. Operations were expected to begin by the first quarter of 2006, but
due to regulatory requirements, operations have been rescheduled to begin in the
second quarter 2006.

On July 7, 2005,  we announced we had entered  into a licensing  agreement  with
RapidMoney(R)  Corporation  that  allows us to use and modify the  RapidMoney(R)
system.  We, along with our venture  partner,  GI, will  incorporate the current
RapidMoney(R)  funds transfer  software  applications for merchant Point of Sale
("POS") terminals into the our Stored Value International  Remittance  Services.
Furthermore,  this license allows us 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.  Located in San
Antonio, Texas,  RapidMoney(R) Corporation developed a system for personal money
transfers on easy-to-use POS terminals.

SANSWIRE NETWORKS, LLC ("SANSWIRE")

Sanswire is developing  high-altitude  airships called Stratellites that support
wireless  broadband  network,  which in turn,  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  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.

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 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 to operate at an altitude of between 55,000
and  65,000  feet using GPS  coordinates  to achieve  its  on-station  position.
Testing of the second  Stratellite  prototype began in the first quarter of 2006
and will continue  through the second quarter.  In parallel,  we are planning to
develop the Sanswire 3 commercial prototype.

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 us,
the  SMDC  sees  several   military   intelligence   gathering  and  operational
applications for Stratellite-type systems.

On January 18,  2005,  we signed a Letter of Intent  ("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 LOI will
create a framework  for  creation of a Space Act  Agreement  between  GTEL,  the
developer  and  provider of the  Stratellite,  a High  Altitude  Platform  (HAP)
Airship,  and NASA Dryden Research Center. The company is currently working with
NASA for flight test support and is also working with the Glenn Research  Center
working with subcomponents Photovoltaic Solar cells.

The parties also envision that the agreement  will employ  provisions  for joint
advocacy and proposal  development efforts in the pursuit of future new business
opportunities  of mutual  benefit.  The  agreement  will  provide NASA and other
agencies the access to the Stratellite for the  installation,  integration,  and
deployment  of NASA  sponsored  sensors and other  projects.  Under the proposed
agreement,  other  government  agencies  may, in  cooperation  with NASA Dryden,
utilize the Stratellite for their projects and requirements.

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 will 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.  The new operation is being
managed by J.  Randolph  Dumas,  a former  senior  Managing  Director  at global
investment  banking firms. Mr. Dumas provides  GlobeTel with decades of business
experience  throughout  Europe and the Middle East. Mr. Dumas is a member of the
Board of Directors of Globetel.


                                       8
<PAGE>
Sanswire  Europe was  formed to  generate  government,  military  and  corporate
contracts for Sanswire's  Stratellite  platforms within Europe.  Sanswire Europe
will extend the Sanswire  operations  into  Europe,  the Middle East and Africa.
Eventually,  other  regional  Sanswire  entities  will  be  created  to  develop
opportunities in other regions including Asia and Latin America.

On September 6, 2005, Sanswire signed a Letter of Intent ("LOI") with the Center
for Solar Energy and Hydrogen Research  Baden-Wuerttemberg (ZSW). The LOI states
that ZSW will  provide  research and  development  engineering  support  under a
Cooperative  Research  and  Development  Agreement  for  the  development  of  a
state-of-the-art  solar-electric  propulsion  system for Sanswire's  Stratellite
airship.

On March 1, 2006, we announced  that our Sanswire  Networks LLC  subsidiary  had
successfully  floated  the  Sanswire  II  Technology   Demonstrator  Airship  in
Palmdale,  California.  This initial testing phase marked the first test of many
currently  planned for the  program.  This first phase will test the  integrated
subsystems  within  the  Stratellite.  The  Sanswire  float  test  followed  our
streamlined test procedure in order to validate the envelope  integrity with the
Sanswire proprietary lifting system and carbon composite structure.  The testing
process was  governed by test  procedures  through a strict  Quality  Management
System, which ensures both the safety and success of this demonstration.

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. However, we currently believe that
the research,  development,  and, ultimately,  the production process to produce
and  market  the  Stratellite  are  proceeding  at a faster  rate than our known
competitors.  Furthermore, since the Sanswire technology 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 that the costs to produce such revenues will
not exceed the  revenues  or that the  project  will  otherwise  be  profitable.
However,  we  do  believe  that  the  technology  and  other  intangible  assets
associated with this project currently have a realizable fair value in excess of
the recorded value of approximately $2.8 million. While the Company is confident
as to the outcome of the project, there can be no assurance that we will be able
to successfully achieve the results we anticipate with this project.

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.

Our use of IP technology and our proprietary  systems and products enables us to
provide  customers with competitive  pricing for  telecommunications  and stored
value services.  Nonetheless,  there can be no assurance that we will be able to
successfully  compete with major  carriers and financial  services  companies in
present  and  prospective  markets.  We are  dependent  upon  local  independent
affiliates  or  associates  partners  in each  market  for sales and  marketing,
customer service and technical support.  This marketing strategy should minimize
our  dependency  on any single  market  and/or group of customers and lessen our
costs and expedite our entry into markets. While there can be no assurances,  we
believe that we will be able to compete in our present and prospective markets.

SOURCES AND AVAILABILITY OF HARDWARE AND SOFTWARE

All  equipment  used  by us is  provided  by  major  suppliers  and  is  readily
available.  Software to operate  the  networks is  commercially  available  from
software suppliers and equipment suppliers,  and 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.

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, including NASA.
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.


                                       9
<PAGE>
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.

TRADEMARKS / REGISTRATIONS

GlobeTel is the owner of the following trademarks:
MAGIC MONEY,  GLOBETEL and STRATELLITE are internationally  registered under the
Madrid Protocol.  GLOBETEL and MAGIC MONEY have been filed in the United States,
Brazil and Canada.

GLOBETEL was registered in Mexico by Globe Tel, S.A. de C,V. of Juarez, Mexico
on October 31, 2002.

STRATELLITE has been filed in the United States, Peru, Canada, Mexico, and
Colombia.

SANSWIRE, INVADER and SKYBOT have been filed in the United States; SANSWIRE logo
registration  has been filed in the United  States,  under the Madrid  Protocol,
Bahrain, Canada, Mexico, Brazil, Argentina, Chile, Colombia and Peru.

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 have
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.

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.

RESEARCH AND DEVELOPMENT

Research and  development  (R&D) costs for 2005 and 2004 in connection  with our
Sanswire  project  were  $2,338,120  and  $260,085,   respectively.   Since  our
acquisition of the Sanswire assets in April 2005, increasing amounts of time and
resources  are  devoted to  Sanswire,  and time and  resources  are  expected to
continue  increasing in the near team as our Stratellite  project  continues and
expands. In 2005, GlobeTel's Wireless R&D expenses amounted to $26,553.

NUMBER OF TOTAL EMPLOYEES AND NUMBER OF FULL-TIME EMPLOYEES

At present we have 65 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.  Through our Sanswire subsidiary, we hired four
highly skilled engineers in connection with our Stratellite project during 2005.


                                       10
<PAGE>
ITEM 1A.   RISK FACTORS

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," "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.

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.

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:

      o     Changes in general  economic,  demographic,  geopolitical  or public
            safety  conditions  which affect  consumer  behavior  and  spending,
            including  the  ongoing  ramifications  of the  September  11,  2001
            terrorist  attacks and the  governmental  response to those attacks,
            including the armed conflict in Iraq or other potential countries;
      o     Increasing competition in the VoIP segment of the telecommunications
            industry;
      o     Adverse  Internet  conditions  which impact customer  traffic on our
            Company's   networks  in  general  and  which  cause  the  temporary
            underutilization of available bandwidth;
      o     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;
      o     Fluctuations  in the  availability  and/or cost of local  minutes or
            other  resources  necessary to  successfully  operate our  Company's
            networks;
      o     Our Company's  ability to raise prices  sufficiently  to offset cost
            increases, including increased costs for local minutes;
      o     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;
      o     Depth  of  management   and   technical   expertise  and  source  of
            intellectual and technological  resources; o Adverse publicity about
            us and our business;
      o     Our current dependence on affiliates in our overseas markets;
      o     The rate of growth of general and administrative expenses associated
            with building a strengthened corporate infrastructure to support our
            Company's growing operations;
      o     Political and economic  risks of doing  business  outside the United
            States,  relations  between  our Company  and its  employees;  legal
            claims and litigation against the Company;
      o     The availability,  amount, type, and cost of capital for the Company
            and the deployment of such capital, including the amounts of planned
            capital expenditures;
      o     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.


                                       11
<PAGE>

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").


ITEM 2. DESCRIPTION OF PROPERTY

We have  leased  facilities  at 9050 Pines  Blvd.,  Suite 110,  Pembroke  Pines,
Florida 33024, as of April 1, 2004. For this new facility, the lease will expire
in June 2009,  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).

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).

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.

We have leased a 66,000  square foot space hanger in Palmdale,  California.  The
initial lease, between Sanswire Networks,  LLC and the City of Los Angeles World
Airports,  was for a term of three  months,  ended July 22,  2005 with a monthly
rent of $19,990.  On June 8, 2005 the lease term was amended for fifteen months,
commencing June 8, 2005 through  September 7, 2006,  with two one-year  options.
Concurrently  with the signing of the amended lease,  the parties entered into a
reimbursement agreement to share the cost of certain improvements.

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  was 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.

Sanswire Technologies,  Inc., the company from which we purchased our intangible
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 Networks,
LLC, utilized the premises.  The employees have since vacated the premises.  The
lease was terminated.

In September 2005, we leased a 2,919 square foot office in Naples,  Florida. The
initial lease,  between  Globetel  Wireless  Corp.,  and Decaster  Capnole Joint
Venture,  is for a term of three  years,  ending on  September  21,  2008 with a
monthly rent of $4,628.33 with increases of 4% per year.

Furthermore,  due  to  our  expected  growth,  including  the  addition  of  new
subsidiaries  and  operations,  additional  space  may be  required  in  various
locations in the United States and abroad in the foreseeable future.


ITEM 3. LEGAL PROCEEDINGS

FORMER CONSULTANTS LITIGATION

We are 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.


                                       12
<PAGE>

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.

We cannot  project an outcome with any  certainty.  We have not entered into any
settlement  negotiations with Mr. Milo and Mr. Quattrocchi and we do not believe
that we will be materially adversely affected by the outcome of this proceeding.

Presently,  we are continuing our 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.

MEXICO ASSOCIATE AND CUSTOMER LITIGATION

We had a  legal  action  against  our  associate  and  customer  in  Mexico  for
non-payment  of the amount they owe us. This  customer has  substantial  assets,
including  telecommunications  equipment,  existing working networks and Mexican
tax  refunds  which they have  proposed to turn over to us. We filed a motion in
the Mexican  courts which was  necessary to formally  request that we 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  they owe us has been fully  paid.  Upon full
payment,  we 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 the customer has caused the  recording of an allowance for
bad debt against this receivable,  for $625,855 in fiscal year 2005 and $938,782
for fiscal year 2004.  In  addition,  during  fiscal year 2005,  the company was
informed by its lawyers that due to negligence  on the part of our customer,  we
would  not be able to  collect  an  anticipated  Mexican  sales  tax  refund  of
$382,160.  Based on this, we recorded an  additional  allowance for bad debt for
this amount as of December 31, 2005. However, the Company will pursue litigation
against this  customer  for the full amount of the Mexican  sales tax refund and
believes that it can be successful in its efforts.

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
us.

On February  8, 2005,  the Company  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.  The
Company is 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.

The Company and Alexsam have subsequently  settled the 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 GlobeTel 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.

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.  Shareholders  re-elected  as  directors  include,
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.


                                       13
<PAGE>

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

<TABLE>
<CAPTION>
CALENDAR 2003                                    HIGH                           LOW
<S>                                              <C>                            <C>
                  Quarter 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 2004
                  Quarter 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 2005
                  Quarter 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                        $1.1400
                  Quarter Ended December 31      $4.3400                        $1.2500

</TABLE>


                                       14
<PAGE>
(b) HOLDERS

As of the date of this report, there were approximately 36,000 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 $71,614,431.  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.


                                       15
<PAGE>

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 24 to financial  statements)  and with stock options
(see  Note 25 to  financial  statements)  and  certain  investment  banking  and
broker's  fees  were  paid  with  preferred  stock  (see  Note  26 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 $81,143,838,  representing an
increase of 179.8%  over the prior year when our gross  sales were  $28,996,213.
Our revenues increased primarily due to revenues from our subsidiary, Centerline
and its subsidiaries,  which recorded  consolidated  revenues of $71,968,367 (or
88.7% of total  revenues),  consisting  primarily of wholesale  traffic revenues
(telecommunications  minutes) and related network management fees. The remainder
of our revenues  continued to be predominantly from  telecommunications  minutes
going  through  our  Philippines  network  through  September  2005.  Thereafter
substantially  all of our  wholesale  traffic  revenues  were  produced  through
Centerline.

Our Philippines network generated $7,674,615 (or 9.5% of gross revenues).  Other
domestic and  international  wholesale traffic revenues were $1,388,679 (or 1.7%
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  $80,730,141  for fiscal  2005,  compared to
$29,187,414  for fiscal  2004.  We expect  cost of sales to  increase  in future
periods to the extent that our sales volume increases.

GROSS  MARGIN  (LOSS).  Our gross  margin was  $413,697 or .5% for fiscal  2005,
compared to a gross loss of  ($191,201)  or (-0.7%) 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 $30,626,495 compared to fiscal year 2004 operating expenses
of $12,850,250 an increase of $17,776,245 or 138.3%.

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.

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.


                                       16
<PAGE>
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  $2,364,673  of research  and  development  costs for our  Sanswire
project and our GlobeTel Wireless business during 2005,  compared to $260,085 in
2004,  an increase of  $2,104,588  or 809.2%.  During  2005,  89% of these costs
represent  direct  expenses  of  development  and  building of the  airship,  as
compared to 60% 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 17).

LOSS FROM OPERATIONS.  We had an operating loss of ($30,212,798) for fiscal year
2005  as  compared  to an  operating  loss of  ($13,041,451)  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.

NET LOSS. We had a net loss of  ($31,953,395)  in fiscal year 2005 compared to a
net loss of ($13,166,869) in fiscal 2004. The net loss is primarily attributable
to the increase in the operating expenses as discussed above.


                                       17
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

ASSETS.  At December 31, 2005,  we had total assets of  $20,319,072  compared to
total assets of $6,195,977 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.  The Company  anticipates  replacing  this  security with its
restricted stock within the next operating cycle.

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.

We had other assets  totaling  $9,959,872  as of December  31, 2005  compared to
$3,189,024 as of December 31, 2004. The variance was  attributable  primarily to
the acquisition of the Hotzone Wireless  intangible  assets valued at $7,129,550
(see note 8), and the disposition of the former unconsolidated  subsidiary,  CGI
for $352,300 (see note 6).

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 8) and to Carrier  Services,  Inc. for
$901,606 and a payable due to former employee of $237,600 (see note 12)

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 8) 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
$4,474,874  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 $349,685 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.


                                       18
<PAGE>
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.

Furthermore,  the capital  markets  have  responded  favorably to our growth and
business  strategies  through 2005,  particularly as a result of our Stratellite
project, and expected revenue from wireless communication projects and increased
investment is anticipated in the near term.

As reflected in the  accompanying  financial  statements,  during the year ended
December 31, 2005, we had a net loss of ($31,953,395)  compared to a net loss of
($13,166,869)  during 2004.  Consequently,  there is an  accumulated  deficit of
($71,614,431)  at December 31, 2005  compared to  ($39,661,036)  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 $28,996,213, representing
an increase of 155.4% over the prior year when our gross sales were $11,351,939.
Our revenues increased primarily due to revenues from our subsidiary, Centerline
and its subsidiaries,  which recorded  consolidated  revenues of $18,397,582 (or
63.5% of total  revenues),  consisting  primarily of wholesale  traffic revenues
(telecommunications  minutes) and related network management fees. The remainder
of our revenues  continued to be predominantly from  telecommunications  minutes
going through our Mexico,  Philippines  and Brazil  networks  through June 2004.
Thereafter  substantially  all of our wholesale  traffic  revenues were produced
through Centerline.

Our Mexico network generated $4,774,657 (or 16.5% of gross revenues),  while our
Philippines  network  generated  $3,234,279 (or 11.2% of gross revenues) and our
Brazil network generated $2,147,119 (or 7.4% of gross revenues).  Other domestic
and international wholesale traffic revenues were $18,840,158 (or 65.0% of gross
revenues), including revenues $7,009,903 (or 24.2% 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  $29,187,414  for fiscal  2005,  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 loss was ($191,201) or (0.66%) for fiscal 2004,
compared to gross  margin of  $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. We expect to derive  higher  margins
once we formally take over the  operations of our  customer's  Mexico network as
described in Part I, Item 3 "Legal  Proceedings," and commence sales directly to
the retail market.

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 $12,850,250  compared to fiscal 2003 operating  expenses of
$3,805,388, an increase of $9,044,862 or 238%.

The  increase  is  primarily  due  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 increase of $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.


                                       19
<PAGE>
We  incurred  $260,865  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 were 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.

LOSS FROM OPERATIONS.  We had an operating loss of ($13,041,451) 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 LOSS.  We had a net loss of  ($13,166,869)  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  $6,195,977  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  $3,189,024  as of December 31, 2004,  compared to
$16,135 as of December 31, 2003. The increase was attributable  primarily to the
acquisition  of  the  Sanswire   intangible  assets  valued  at  $2,778,000  and
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.


                                       20
<PAGE>
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  $4,474,874  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 $349,685
compared to $607,401 cash used 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  cash provided in
the previous year,  which was principally  from the sale of preferred and common
stock and proceeds from notes and loans payable.

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 in
sales of preferred stock in 2004,  compared to $717,140 and $500,000 in 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.

As reflected in the  accompanying  financial  statements,  during the year ended
December 31, 2004, we had a net loss of ($13,166,869)  compared to a net loss of
($6,202,526)  during  2003.  Consequently,  there is an  accumulated  deficit of
($39,661,036)  at December 31, 2004,  compared to  ($26,494,167) at December 31,
2003.


                                       21
<PAGE>
ITEM 7. FINANCIAL STATEMENTS

                 GLOBETEL COMMUNICATIONS CORP. AND SUBSIDIARIES
                        CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2005, 2004 AND 2003
                                TABLE OF CONTENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
CONSOLIDATED FINANCIAL STATEMENTS                                       PAGE
                                                                        ----

         Consolidated Balance Sheets                                      23
         Consolidated Statements of Operations                            25
         Consolidated Statements of Cash Flows                            26
         Consolidated Statements of Stockholders' Equity                  28
         Notes to Consolidated Financial Statements                       33

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


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders
GlobeTel Communications Corp. and Subsidiaries

We  have  audited  the  accompanying  consolidated  balance  sheet  of  GlobeTel
Communications  Corp. and Subsidiaries (the Company) as of December 31, 2005 and
2004,  and the related  consolidated  statements of  operations,  cash flows and
stockholders' equity for the years 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 audit provides 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 ended  December
31, 2005, 2004 and 2003, in conformity with U.S. generally  accepted  accounting
principles.

Miami, Florida
March 13, 2006

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



                                       22
<PAGE>
                 GLOBETEL COMMUNICATIONS CORP. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
                                                                                           DEC. 31, 2005        DEC. 31, 2004
-----------------------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
<S>                                                                                         <C>                  <C>
      Cash and cash equivalents                                                             $  1,228,180         $    601,559
      Restricted cash                                                                          1,122,000                   --
      Accounts receivable, less allowance for doubtful
        accounts of $409,100 and $1,505,731                                                      371,618            1,740,883
      Loans to employees                                                                          46,068                6,885
      Prepaid expenses                                                                           184,434               58,900
      Prepaid expenses - related party, ISG Jet, LLC                                             185,960                   --
      Inventory                                                                                   67,525               63,976
      Deposits on equipment purchase                                                             124,993               88,994
      Deferred tax asset, less valuation allowance of
        $9,828,700 and $5,163,407                                                                     --                   --
-----------------------------------------------------------------------------------------------------------------------------
         TOTAL CURRENT ASSETS                                                                  3,330,778            2,561,197
-----------------------------------------------------------------------------------------------------------------------------

PROPERTY AND EQUIPMENT, NET                                                                    7,028,422              445,756
-----------------------------------------------------------------------------------------------------------------------------

OTHER ASSETS
     Investment in unconsolidated foreign subsidiary -
       Consolidated Global Investments, Ltd.                                                          --              352,300
      Intangible assets                                                                        9,907,550            2,778,000
     Deposits                                                                                     52,322               50,712
     Prepaid expenses                                                                                 --                8,012
-----------------------------------------------------------------------------------------------------------------------------
         TOTAL OTHER ASSETS                                                                    9,959,872            3,189,024
-----------------------------------------------------------------------------------------------------------------------------

TOTAL ASSETS                                                                                $ 20,319,072         $  6,195,977
-----------------------------------------------------------------------------------------------------------------------------

LIABILITIES AND STOCKHOLDERS' EQUITY

COMMITMENTS AND CONTINGENCIES (NOTES 6, 7, 17, AND 18)                                                --                   --

LIABILITIES

CURRENT LIABILITIES
      Accounts payable                                                                      $    907,208         $    456,248
      Current portion of long-term debt                                                               --                2,846
      Due 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              198,333
      Accrued expenses and other liabilities                                                     545,636               93,436
      Deferred revenues                                                                               --               46,319
      Related party payables                                                                      57,500              117,500
-----------------------------------------------------------------------------------------------------------------------------
         TOTAL CURRENT LIABILITIES                                                             5,198,766              914,682
-----------------------------------------------------------------------------------------------------------------------------

LONG-TERM LIABILITIES
      Due to related party payable in GTE Stock -
        Hotzone Wireless, Inc.                                                                 4,708,167                   --
      Capital lease obligations                                                                       --                4,718
-----------------------------------------------------------------------------------------------------------------------------
         TOTAL LONG-TERM LIABILITIES                                                           4,708,167                4,718

-----------------------------------------------------------------------------------------------------------------------------
         TOTAL LIABILITIES                                                                  $  9,906,933         $    919,400
-----------------------------------------------------------------------------------------------------------------------------

</TABLE>


                                       23
<PAGE>
<TABLE>
<S>                                                                                         <C>                  <C>
 STOCKHOLDERS' EQUITY
       Series A Preferred stock, $.001 par value, 10,000,000 shares authorized;
          0 and 96,500 shares issued and outstanding:                                                 --                   97
           Additional paid-in capital - Series A Preferred stock                                      --              697,403
       Series B Preferred stock, $.001 par value, 35,000 shares authorized;
          0 and 35,000 shares issued and outstanding:                                                 --                   35
           Additional paid-in capital - Series B Preferred stock                                      --           14,849,965
       Series C Preferred stock, $.001 par value, 5,000 shares authorized;
          500 and 750 shares issued and outstanding:                                                  --                    1
           Additional paid-in capital - Series C Preferred stock                                      --              749,999
       Series D Preferred stock, $.001 par value, 5,000 shares authorized;
          1,000 shares issued and outstanding:                                                         1                    1
           Additional paid-in capital - Series D Preferred stock                                 999,999              999,999
       Common stock, $.00001 par value, 150,000,000 shares authorized;
          98,192,101 and 63,389,976 shares issued and outstanding                                    982                  634
       Additional paid-in capital                                                             81,570,082           39,889,479
       Stock subscriptions receivable:
          Series B Preferred Stock                                                                    --          (11,500,000)
          Series D Preferred Stock                                                              (500,000)            (750,000)
          Common Stock                                                                           (44,494)                  --
       Accumulated deficit                                                                   (71,614,431)         (39,661,036)
-----------------------------------------------------------------------------------------------------------------------------
          TOTAL STOCKHOLDERS' EQUITY                                                          10,412,139            5,276,577
-----------------------------------------------------------------------------------------------------------------------------

 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                 $ 20,319,072         $  6,195,977
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes.



                                       24
<PAGE>
                 GLOBETEL COMMUNICATIONS CORP. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                         FOR THE YEARS ENDED DECEMBER 31


<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
                                                                                  2005            2004            2003
--------------------------------------------------------------------------------------------------------------------------

<S>                                                                           <C>             <C>             <C>
 REVENUES EARNED                                                              $ 81,143,838    $ 28,996,213    $ 11,351,939
 COST OF REVENUES EARNED                                                        80,730,141      29,187,414       8,840,872
--------------------------------------------------------------------------------------------------------------------------
        GROSS MARGIN(LOSS)                                                         413,697        (191,201)      2,511,067
--------------------------------------------------------------------------------------------------------------------------

 EXPENSES
      Payroll and related taxes                                                  3,118,676       1,248,562         283,408
      Consulting and professional fees                                           6,200,054       2,206,237         718,987
      Officers' and directors' compensation                                     12,082,809       6,520,206         595,000
      Bad debts                                                                  1,373,458       1,141,534       1,409,994
      Investment banking and financing fees                                        788,985         172,106         223,886
      Investor and public relations                                                550,460         117,856         121,656
      Commissions expense - related party Carrier Services, Inc.                   848,880         404,747              --
      Research and development                                                   2,364,673         260,085              --
      Other operating expenses                                                     826,101         156,011          92,715
      Telephone and communications                                                 200,129          75,390          69,169
      Travel and related expenses                                                  882,557         240,862          95,213
      Rents                                                                        480,995         126,424          48,607
      Insurance and employee benefits                                              672,700         126,644         102,383
      Depreciation and amortization                                                236,018          53,586          44,370
--------------------------------------------------------------------------------------------------------------------------
        TOTAL EXPENSES                                                          30,626,495      12,850,250       3,805,388
--------------------------------------------------------------------------------------------------------------------------

 LOSS BEFORE OTHER INCOME (EXPENSE) AND INCOME TAXES                           (30,212,798)    (13,041,451)     (1,294,321)
--------------------------------------------------------------------------------------------------------------------------

 OTHER INCOME (EXPENSE)
      Net gains on settlement of liabilities                                            --         268,397          26,274
      Loss 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                                                   --              --          55,842
      Loss 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                                                      (31,953,395)    (13,166,869)     (6,202,526)

 INCOME TAXES
      Provision for income taxes                                                        --              --              --
      Tax benefit from utilization of net operating loss carryforward                   --              --              --
--------------------------------------------------------------------------------------------------------------------------
        TOTAL INCOME TAXES                                                              --              --              --
--------------------------------------------------------------------------------------------------------------------------

 NET LOSS                                                                     ($31,953,395)   ($13,166,869)   ($ 6,202,526)
--------------------------------------------------------------------------------------------------------------------------

 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
        BASIC                                                                   75,072,487      49,892,551      41,854,325
        DILUTED                                                                 75,072,487      49,892,551      41,854,325
--------------------------------------------------------------------------------------------------------------------------


 NET LOSS PER SHARE
        BASIC                                                                 ($     0.426)   ($     0.264)   ($     0.148)
        DILUTED                                                               ($     0.426)   ($     0.264)   ($     0.148)
--------------------------------------------------------------------------------------------------------------------------
</TABLE>

 See accompanying notes


                                       25
<PAGE>


                 GLOBETEL COMMUNICATIONS CORP. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                        FOR THE YEARS ENDED DECEMBER 31,


<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
                                                                                              2005           2004           2003
--------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                   <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
      Net income (loss)                                                               ($31,953,395)  ($13,166,869)  ($ 6,202,526)
      Adjustments to reconcile net loss to net cash used by operating activities:
             Depreciation and amortization                                                 331,543        170,021        227,200
             Gain on settlement of liabilities                                                  --        (85,337)        26,274
             Gain on discontinued operations                                                    --             --         55,842
             Loss on settlement                                                          1,256,873             --             --
             Loss on disposition of unconsolidated foreign subsidiary - CGI                352,300             --             --
             Loss on disposition of fixed assets                                                --         56,804         42,301
             Loss on write-off of receivables and non-readily marketable securities             --             --      4,834,878
             Bad debt expense                                                            1,373,458      1,141,534      1,409,994
             Common stock exchanged for services                                         4,930,573      1,558,707        604,510
             Common 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)         4,088        (71,000)
             Prepaid expenses - related party, ISG Jets, LLC                              (185,960)            --             --
             Inventory                                                                      (3,549)       (63,976)            --
             Other current assets                                                               --             --             --
             Deposits                                                                       (1,610)       (34,977)        74,486
      Increase (decrease) in liabilities:
             Accounts payable                                                              451,141       (309,867)     1,111,960
             Accounts 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        426,460
             Deferred revenues                                                             (46,319)        14,791        (46,106)
             Deferred revenues - related party                                                  --        (27,023)      (152,822)
--------------------------------------------------------------------------------------------------------------------------------
             NET CASH USED BY OPERATING ACTIVITIES                                     (12,610,149)    (4,474,874)    (1,389,102)
--------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
      Acquisition 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)
--------------------------------------------------------------------------------------------------------------------------------
             NET CASH USED BY INVESTING ACTIVITIES                                      (2,084,559)      (349,685)      (607,401)
--------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
      Sale of preferred stock - Series A                                                        --      1,057,500        717,140
      Sale 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             --        500,000
      Sale 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        784,259
      Payments on notes and loans payable                                                   (2,846)      (398,701)            --
      Proceeds from related party payables                                                      --         60,000        144,194
      Payments on related party payables                                                   (60,000)            --        (96,053)
--------------------------------------------------------------------------------------------------------------------------------
             NET CASH PROVIDED BY FINANCING ACTIVITIES                                  15,321,329      5,201,124      2,019,866
--------------------------------------------------------------------------------------------------------------------------------

NET INCREASE IN CASH AND EQUIVALENTS                                                       626,621        376,565         23,363
CASH AND EQUIVALENTS - BEGINNING                                                           601,559        224,994        201,631

--------------------------------------------------------------------------------------------------------------------------------
CASH AND EQUIVALENTS - ENDING                                                         $  1,228,180   $    601,559   $    224,994
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>


                                       26
<PAGE>


                 GLOBETEL COMMUNICATIONS CORP. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                        FOR THE YEARS ENDED DECEMBER 31,


<TABLE>
<CAPTION>

SUPPLEMENTAL DISCLOSURES                                                                  2005           2004           2003
--------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                   <C>            <C>            <C>
Cash paid during the period for:
         Interest                                                                     $        730   $     11,071   $     95,736
         Income taxes                                                                 $         --   $         --   $         --

In addition to amounts reflected above, common stock was issued for:
         Options issued for services                                                  $ 10,499,842   $  5,828,833   $     10,000
         Options issued for settlement of obligations                                 $  1,256,873   $         --   $  2,447,732
         Shares issued for services                                                   $  4,930,573   $  1,546,568   $         --
         Shares issued for broker's fees (66,667 shares, recorded at par)             $         --   $         --   $         --
         Shares issued for intangible assets                                          $         --   $  2,800,000   $         --
         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,
           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

</TABLE>

 See accompanying notes.


                                       27
<PAGE>
                  GLOBETEL COMMUNICATIONS CORP. & SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
              FOR THE YEARS ENDED DECEMBER 31, 2005, 2004, AND 2003


<TABLE>
<CAPTION>
                                                                       COMMON STOCK
                                                 --------------------------------------------------------
                                                                                ADDITIONAL       STOCK
                                                                                  PAID-IN    SUBSCRIPTIONS
Description                                           SHARES         AMOUNT       CAPITAL      RECEIVABLE
----------------------------------------------------------------------------------------------------------
<S>                                              <C>            <C>             <C>          <C>
 Balance, 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 severence 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 subscriptons 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                 1,866,667             19      2,799,981             --
 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 2004
   Stock Option Plan                                      --             --      1,191,937             --
 Options issued for services, per Executives %
   Stock Option Grant Plan                                --             --      4,491,583             --
 Net loss                                                 --             --             --             --
                                                 -----------    -----------    -----------    -----------
 Balance, Dec. 31, 2004                           63,389,976            634     39,889,479             --
                                                 -----------    -----------    -----------    -----------
 Shares issued for options excercised              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        4,269,876             43      6,367,983             --
   and accrued interest
 Shares issued for cash                            3,177,916             32      6,903,901             --
 Shares issued for brokers fees                       66,667              1             (1)            --
 Shares issued for severence 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                           98,192,102            982     81,570,082        (44,494)
                                                 ===========    ===========    ===========    ===========
</TABLE>


                                       28
<PAGE>
<TABLE>
<CAPTION>
                                                                         SERIES A
                                                 --------------------------------------------------------
                                                                                ADDITIONAL      STOCK
                                                                                  PAID-IN   SUBSCRIPTIONS
Description                                           SHARES         AMOUNT       CAPITAL     RECEIVABLE
----------------------------------------------------------------------------------------------------------
<S>                                                   <C>         <C>            <C>             <C>
 Balance, Dec. 31, 2002                                   --             --             --             --
 Shares issued for services                               --             --             --             --
 Options issued for services                              --             --             --             --
 Shares issued for severence 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 subscriptons 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 Stratodyne assets                      --             --             --             --
 Preferred Series A shares issued for cash
  and stock subscriptions receivable                  70,500             71      1,057,429        375,000
 Preferred 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                               96,500             97        697,403             --
                                                 -----------    -----------    -----------    -----------
 Shares issued for options excercised                     --             --             --             --
 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 severence 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                                   --             --             --             --
                                                 ===========    ===========    ===========    ===========
</TABLE>


                                       29
<PAGE>
<TABLE>
<CAPTION>
                                                                         SERIES B
                                                  -------------------------------------------------------
                                                                                ADDITIONAL      STOCK
                                                                                  PAID-IN   SUBSCRIPTIONS
Description                                           SHARES         AMOUNT       CAPITAL     RECEIVABLE
----------------------------------------------------------------------------------------------------------
<S>                                              <C>            <C>             <C>         <C>
 Balance, Dec. 31, 2002                                   --             --             --             --
 Shares issued for services                               --             --             --             --
 Options issued for services                              --             --             --             --
 Shares issued for severence 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 subscriptons 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                  35,000             35     14,999,965    (12,150,000)
 Preferred Series B shares issued for
  extinguishment of debt                                  --             --             --        500,000
 Preferred Series B shares issued for
  broker's fees                                           --             --       (150,000)       150,000
 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                               35,000             35     14,849,965    (11,500,000)
                                                 -----------    -----------    -----------    -----------
 Shares issued for options excercised                     --             --             --             --
 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 severence 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             --             --             --      5,085,200
 Shares issued for conversion of Preferred
  Series B shares                                    (35,000)           (35)   (14,849,965)     6,414,800
 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                                   --             --             --             --
                                                 ===========    ===========    ===========    ===========
</TABLE>


                                       30
<PAGE>
<TABLE>
<CAPTION>
                                                                      SERIES C
                                                 ---------------------------------------------------------
                                                                                ADDITIONAL       STOCK
                                                                                  PAID-IN    SUBSCRIPTIONS
Description                                           SHARES         AMOUNT       CAPITAL      RECEIVABLE
----------------------------------------------------------------------------------------------------------
<S>                                                      <C>        <C>            <C>                  <C>
 Balance, Dec. 31, 2002                                   --             --             --              --
 Shares issued for services                               --             --             --              --
 Options issued for services                              --             --             --              --
 Shares issued for severence 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 subscriptons 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                                  750              1        749,999              --
                                                 -----------    -----------    -----------      ----------
 Shares issued for options excercised                     --             --             --              --
 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 severence 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                                   --             --             --              --
                                                 ===========    ===========    ===========      ==========
</TABLE>


                                       31
<PAGE>
<TABLE>
<CAPTION>
                                                                     SERIES D
                                                 --------------------------------------------------------
                                                                             ADDITIONAL      STOCK                        TOTAL
                                                                               PAID-IN   SUBSCRIPTIONS    ACCUMULATED  SHAREHOLDERS'
Description                                           SHARES        AMOUNT     CAPITAL     RECEIVABLE       DEFECIT       EQUITY
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                <C>         <C>          <C>            <C>           <C>              <C>
 Balance, Dec. 31, 2002                                   --            --           --             --   (20,291,641)     4,158,869
 Shares issued for services                               --            --           --             --            --        568,510
 Options issued for services                              --            --           --             --            --         10,000
 Shares issued for severence pay                          --            --           --             --            --         36,000
 Shares issued for extinguishment of debt                 --            --           --             --            --      1,431,084
 Options issued for extinguishment of debt                --            --           --             --            --      1,016,468
 Shares issued for cash                                   --            --           --             --            --        500,000
 Shares issued for loan collateral                        --            --           --             --            --             --
 Shares returned for loan collateral                      --            --           --             --            --             --
 Preferred Series A shares issued for cash
  and stock subscriptons receivable                       --            --           --             --            --        717,140
 Net loss                                                 --            --           --             --    (6,202,526)    (6,202,526)
                                                 -----------   -----------  -----------     ----------   -----------     ----------
 Balance, Dec. 31, 2003                                   --            --           --             --   (26,494,167)     2,235,545
                                                 -----------   -----------  -----------     ----------   -----------     ----------
 Shares issued for options exercised                      --            --           --             --            --             --
 Shares issued to / for unconsolidated
   foreign subsidiary                                     --            --           --             --            --             --
 Shares issued for services                               --            --           --             --            --      1,546,568
 Shares issued for Sanswire assets                        --            --           --             --            --      2,800,000
 Shares issued for Stratodyne assets                      --            --           --             --            --             --
 Preferred Series A shares issued for cash
  and stock subscriptions receivable                      --            --           --             --            --      1,432,500
 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                      --            --           --             --            --      2,850,000
 Preferred Series B shares issued for
  extinguishment of debt                                  --            --           --             --            --        500,000
 Preferred Series B shares issued for
  broker's fees                                           --            --           --             --            --             --
 Preferred Series C shares issued for cash
  and stock subscriptions receivable                      --            --           --             --            --      1,000,000
 Shares issued for conversions of
  Preferred Series C shares                               --            --           --             --            --             --
 Preferred Series D shares issued for cash             1,000             1      999,999       (750,000)           --        250,000
 Options issued for Board member stipends                 --            --           --             --            --        145,313
 Options issued for services, per 2004
   Stock Option Plan                                      --            --           --             --            --      1,191,937
 Options issued for services, per Executives %
   Stock Option Grant Plan                                --            --           --             --            --      4,491,583
 Net loss                                                 --            --           --             --   (13,166,869)   (13,166,869)
                                                 -----------   -----------  -----------     ----------   -----------     ----------
 Balance, Dec. 31, 2004                                1,000             1      999,999       (750,000)  (39,661,036)     5,276,577
                                                 -----------   -----------  -----------     ----------   -----------     ----------
 Shares issued for options excercised                     --            --           --             --            --         48,412
 Shares issued for services                               --            --           --             --            --      4,930,751
 Shares issued for convertible note payable               --            --           --             --            --      6,368,026
   and accrued interest
 Shares issued for cash                                   --            --           --             --            --      6,903,932
 Shares issued for brokers fees                           --            --           --             --            --             --
 Shares issued for severence pay                          --            --           --             --            --        177,397
 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                                         --            --           --             --            --             --
 Preferred Series B stock subscriptions
  receivable paid for with cash and equipment             --            --           --             --            --      5,085,200
 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                           --            --           --        250,000            --        250,000
 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                                                 --            --           --             --   (31,953,395)   (31,953,395)
                                                 -----------   -----------  -----------     ----------   -----------     ----------
 BALANCE, DEC. 31, 2005                                1,000             1      999,999       (500,000)  (71,614,431)    10,412,139
                                                 ===========   ===========  ===========     ==========   ===========     ==========
</TABLE>


                                       32
<PAGE>
                 GLOBETEL COMMUNICATIONS CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


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.

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.


                                       33
<PAGE>
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.  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.

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.


                                       34
<PAGE>
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.

INTANGIBLE ASSETS

Intangible assets are recorded under the provisions of the Financial  Accounting
Standards Board (FASB) Statement No.142 (FAS 142), Goodwill and Other Intangible
Assets.  FAS 142  requires  that an  intangible  asset that is  acquired  either
individually  or with a group  of other  assets  (but not  those  acquired  in a
business  combination)  shall be initially  recognized and measured based on its
fair value. Costs of internally developing, maintaining and restoring intangible
assets (including  goodwill) that are not specifically  identifiable,  that have
indeterminate  lives, or that are inherent in a continuing  business and related
to an entity as a whole, are recognized as an expense when incurred.

An  intangible  asset with a definite  useful life is  amortized;  an intangible
asset with an indefinite  useful life is not amortized  until its useful life is
determined to be no longer indefinite.  The remaining useful lives of intangible
assets not being  amortized are evaluated  every  reporting  period to determine
whether events and circumstance continue to support an indefinite useful life.

An  intangible  asset that is not  subject to  amortization  shall be tested for
impairment  annually or more  frequently  if events or changes in  circumstances
indicate  that the asset might be impaired.  The  impairment  test consists of a
comparison of the fair value of the intangible  assets with its carrying amount.
If the  carrying  amount of an  intangible  asset  exceeds  its fair  value,  an
impairment loss shall be recognized in an amount equal to that excess.

It is the Company's  policy to test for impairment no less than  quarterly.  The
Company's intangible assets,  which consist primarily of intellectual  property,
including technology and know-how,  were evaluated by management,  initially and
as of December 31, 2005,  and  determined to have an indefinite  useful life and
are not  subject  to  amortization.  The  Company  also  tested  the  assets for
impairment and determined  that no adjustment for impairment was necessary as of
December 31, 2005,  whereas the fair value of the  intangible  assets exceed its
carrying amount.

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).


                                       35
<PAGE>
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.

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:

<TABLE>
<CAPTION>

NET LOSS PER COMMON SHARE
                                                                     INCOME           SHARES         PER-SHARE
                                                                   (NUMERATOR)    (DENOMINATOR)        AMOUNT
--------------------------------------------------------------------------------------------------------------

<S>                                                               <C>               <C>          <C>
BASIC NET LOSS PER SHARE:

Income (loss) available to common stockholders                    ($31,953,395)     75,072,487   $     (.4260)

Effect of Dilutive Convertible Preferred Stock and Option                   --              --             --

DILUTED NET INCOME (LOSS) PER SHARE:

Income (loss) available to common stockholders plus,
assumed conversions and exercises                                 ($31,953,395)     75,072,487   $     (.4260)
</TABLE>

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.


                                       36
<PAGE>
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.

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:

<TABLE>
<CAPTION>
                                                                             2005            2004
                                                                        ------------    ------------
<S>                                                                     <C>             <C>
Net Loss for the year - as reported                                     ($31,953,395)   ($13,166,869)
ADD: Total stock-based compensation
included in net loss, as reported determined under
APB 25, net of related tax effects                                        10,499,842       5,828,833

DEDUCT: 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                                        ($35,882,887)   ($12,661,355)
                                                                        ============    ============
</TABLE>

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         2003
                                      -------       -------       ------
Expected 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 years
Block 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.


                                       37
<PAGE>
NOTE 2. ACCOUNTS  RECEIVABLE  AND SALES - SIGNIFICANT  CONCENTRATIONS  OF CREDIT
RISK AND ECONOMIC DEPENDENCE

In 2005 we had  approximately 22 customers of which one accounted for 10% of the
Company's sales for 2005, all of which related to the Philippines network. Eight
customers  accounted for 98% of sales for 2004 and two  customers  accounted for
97% of sales for 2003,  including 7% attributable to the Brazil network,  41% to
the Mexico (including 17% related to our Mexico network and 24% unrelated to our
network),  and 11% to the  Philippines  network.  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  $80,182,465 or 99% of total sales; for December 31, 2004, were $28,783,098
or 99% of total  sales;  and for December  31, 2003 were  $11,256,907  or 99% of
total  sales  The  amounts  include  $71,562,620  or 88%  of  totals  sales  and
$7,782,541  or 10% for 2005 for Mexico and the  Philippines,  respectively.  For
prior years,  revenues of  $2,147,119  or 7% for 2004 and  $2,923,981 or 26% for
2003 from  Brazil and  $11,892,643  or 41% 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 3. 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.


                                       38
<PAGE>
NOTE 4. 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.


NOTE 5. PROPERTY AND EQUIPMENT

PROPERTY AND EQUIPMENT CONSISTED OF THE FOLLOWING:       2005           2004
                                                     -----------    -----------
Telecommunications equipment                         $ 1,356,966    $   566,226
Assets not yet placed in service                       5,267,526          - 0 -
Computer and related equipment                           468,916        143,802
Office furniture and fixtures                            531,972          5,730
                                                     -----------    -----------
TOTAL PROPERTY AND EQUIPMENT                           7,625,380        715,758
Accumulated 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 6 - 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.

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.


                                       39
<PAGE>

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 7 - ASSET ACQUISITION AND INTANGIBLE ASSETS - SANSWIRE

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.,  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.

The Company entered into a purchase  agreement,  effective August 23, 2004, with
Sanswire  Technologies,  Inc.,  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 Technologies,  Inc.
agreement. Stratodyne was the primary contractor for Sanswire Technologies, Inc.

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

As  consideration  for the purchase,  the Company  issued  1,866,667 (28 million
pre-split) shares of its common stock to Sanswire Technologies, Inc. In November
2004,  all  the  final  documents  were  delivered  and  the   relationship  was
consummated. In September 2005, pursuant to the Stratodyne agreement, 133,333 (2
million  pre-split) shares of the Company's common stock were issued directly to
Stratodyne's principal  shareholder.  These shares are included in the 1,866,667
(28 million pre-split) shares originally issued to Sanswire Technologies,  Inc.,
and,  accordingly,  the Sanswire  Technologies,  Inc.  shareholders  retain only
1,733,334  (26 million  pre-split)  shares  issued and  returned  the 133,334 (2
million  pre-split) of the previously issued shares to the Company.  On February
5, 2005,  GlobeTel filed a registration  statement to register shares associated
with these agreements.


                                       40
<PAGE>
CONTINGENT CONSIDERATION

In  accordance  with the  Sanswire  and  Stratodyne  agreements,  a total of 1.9
million shares (28 million  pre-split) were issued, as discussed in our December
31,  2004,  Form  10-KSB.  On February 5, 2005,  GlobeTel  filed a  registration
statement to register  shares  associated with these  agreements.  An additional
13.3 million (200 million  pre-split)  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
3.3 million (50 million  pre-split) of the 13.3 million (200 million  pre-split)
additional  shares  will be  issued to  Stratodyne  or its  assignee(s)  and the
remaining 10 million (150 million  pre-split)  shares to Sanswire  Technologies,
Inc.

For purposes of the Sanswire Technologies, Inc. purchase agreement as amended, 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.  "Successful Commercial Launch" means (a) a launch ("Launch") within
(i) eighteen (18) months after a successful  launch by the Company or any of its
affiliates of a prototype airship  (dirigible) that was then under construction,
by the Company or any of its affiliates of an airship  (dirigible)  that is able
to (I) reach and maintain an altitude of at least 65,000 feet,  (II)  maintain a
position  in  one  GPS  coordinate,  (III)  receive  and  transmit  commercially
acceptable  two-way  wireless  voice and Internet  transmissions  (collectively,
"Services"),  and (b) there is at least one  paying  customer  for the  Services
within one year of the Launch, but not later than 30 months from the date of the
launch of the prototype airship then under construction.

As of the date of this report,  the conditions  precedent to the  entitlement to
the issuance of the additional shares have not yet been fulfilled.

ACCOUNTING FOR PURCHASE PRICE OF INTANGIBLE ASSETS

The purchase price for the assets acquired was  $2,800,000,  based on a value of
$1.50 ($ .10  pre-split)  per share for the  1,866,667  (28  million  pre-split)
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  intangible
assets - $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.

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 13,333,334 (200 million  pre-split)  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.

The  intangible   assets  include   technology-based,   marketing-related,   and
contract-related  assets.  The Company  determined that the Sanswire  intangible
assets  have  an  indefinite  life,  and,   accordingly,   are  not  subject  to
amortization.  Instead,  the  Company  tests 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,  and through the date of
this filing.  Sanswire-FL's research,  development,  testing of, and cooperation
with governmental and commercial entities regarding,  the Stratellite technology
is continuing,  and no event occurred or circumstances known to management exist
to indicate impairment.

The results of operations of Sanswire Networks,  LLC for the year ended December
31,  2005,  which are  consolidated  in the  Company's  results  of  operations,
included expenses of $4,300,866 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.

The Company has provided  amounts to or on behalf of Sanswire  Networks,  LLC in
excess of the above amounts, including approximately $5,027,550 through December
31,  2005,  and at total of  approximately  $5,814,457  through the date of this
report.


                                       41
<PAGE>
EMPLOYMENT AGREEMENTS

In connection with the Sanswire Technologies, Inc. asset purchase agreement, the
Company also  entered into  three-year  employment  agreements  with five former
Sanswire  Technologies,  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.

During the three  months  ended  September  30,  2004,  the  Company  decided to
restructure  the operations of Sanswire  Networks,  LLC and eliminate  redundant
positions.  As a result,  Mr.  Molen  accepted  the  appointment  as Chairman of
Sanswire  Networks,  LLC and was a member of  GlobeTel's  Board of Directors and
stepped down as CEO of Sanswire  Networks,  LLC. Effective in 2005, Mr. Molen is
no longer a member of  Globetel's  Board of  Directors.  The Company  closed the
Sanswire  Technologies,  Inc.  offices in Atlanta and Mr. Sistrunk and Ms. Molen
have separated from the Company.

In  connection  with the  Stratodyne  agreement,  the Company had 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 received a salary of no less than $75,000 per year, plus
grants of stock options based on performance  evaluations  given annually by the
Company. During the first quarter 2005, Mr. Koenig resigned from his position in
the Company and new key employees were employed.

In March 2005, Sanswire entered into employment agreements with certain Sanswire
personnel. In order to attract these key employees, and in connection with these
employment agreements,  the Company recorded $300,000 in signing bonuses payable
with GlobeTel  stock.  However,  upon agreement with the Company,  the employees
returned the shares and elected to receive  stock options for the same number in
shares  that  would  have  been  issued  for the  $300,000  at the  dates of the
agreements.  None of the  shares  have  been  exercised  as of the  date of this
report.


NOTE 8 - ASSET ACQUISITION AND INTANGIBLE ASSETS - HOTZONE

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 intangible assets - $2,224,424.

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).


                                       42
<PAGE>
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 Company  intends to issue the
first tranche of 666,667  shares in the near-term and the remaining  shares will
be issued as scheduled.

As  of  December  31,  2005,  the  HotZone  intangible  assets  were  valued  at
$7,129,550.  The Company  determined that the HotZone  intangible assets have an
indefinite life, and,  accordingly,  are not subject to amortization.  (Instead,
the Company tests 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, and through the date of this filing. GlobeTel Wireless, which
utilizes the intangible  assets acquired,  has current and pending contracts and
anticipates  receiving  revenues  in the  near-term,  and no event  occurred  or
circumstances known to management exist to indicate impairment.


NOTE 9. 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.

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.


                                       43
<PAGE>
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 10 - 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 11 - 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.

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.


                                       44
<PAGE>
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.


NOTE 12 - 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 13. 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.


                                       45
<PAGE>
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 14. ACCRUED EXPENSES AND OTHER LIABILITIES

Accrued expenses and other liabilities consisted of the following:

                                                              2005      2004
                                                             -------   -------
Interest                                                       3,105     3,436
Payroll Liabilities                                          238,243     - 0 -
Rent                                                          22,467     - 0 -
Professional Fees                                            281,821    90,000
                                                             -------   -------
ACCRUED EXPENSES AND OTHER LIABILITIES                       545,636    93,436
                                                             -------   -------


NOTE 15. 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.

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.


                                       46
<PAGE>

NOTE 16. 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.

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.


                                       47
<PAGE>

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.

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.


                                       48
<PAGE>
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 17 - 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).

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.


                                       49
<PAGE>
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 18 - 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.

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.


                                       50
<PAGE>
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.

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.


                                       51
<PAGE>
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.

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.


                                       52
<PAGE>

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.

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.

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.


                                       53
<PAGE>
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.


NOTE 19. 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.



                                       54
<PAGE>

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.

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).


                                       55
<PAGE>
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).

In  September  2005,  the Company  leased a 2,919  square foot office in Naples,
Florida.  The initial  lease,  between  Globetel  Wireless  Corp.,  and Decaster
Capnole  Joint  Venture,  is for a term of three years,  ending on September 21,
2008 with a monthly rent of $4,628 with increases of 4% per year.

Our wholly owned subsidiary, Centerline Communications, is leasing approximately
6,519  square  feet of  office  space  where  the  Telecommunications  switch is
residing. This facility is at 611 Wilshire Blvd, Suite 500, Los Angeles, CA. The
lease  agreement began on May 1, 2005 and runs for seven years until January 31,
2012 at a base rent of $7,497.  In  addition,  our  subsidiary  is also  leasing
approximately  1,975 square feet of administrative  office at 5515 Doyle Street,
Suite 12,  Emeryville,  CA with a base rent of $2,307. The term of the agreement
began on May 1, 2005 and runs until January 31, 2008.

The Company  leases a 66,000  square foot space hanger in Palmdale,  California.
The initial lease,  between Sanswire  Networks,  LLC and the City of Los Angeles
World  Airports,  was for a term of three  months,  ended  July 22,  2005 with a
monthly rent of $19,990.  On June 8, 2005 the lease term was amended for fifteen
months,  commencing  June 8, 2005 through  September 7, 2006,  with two one-year
options. Concurrently with the signing of the amended lease, the parties entered
into a reimbursement agreement to share the cost of certain improvements.

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 2005. The agreement  provides that with the consent
of the lessor we may remain on a  month-to-month  basis. The Company remained in
the  space  on a  month-to-month  basis  until  moving  to its new  facility  in
Palmdale, California as described above.

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.

Sanswire  Technologies,  Inc.,  the company from which we purchased our Sanswire
Networks,  LLC  intangible  assets,  had an office space lease in Dekalb County,
Georgia.  The lease term was from April 1, 2005  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 Networks, 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.


                                       56
<PAGE>
Future  minimum  rental  payments  required  under  the above  operating  leases
subsequent to the year ended December 31, 2005 are as follows:

                2006                       $  515,022
                2007                          415,520
                2008                          427,486
                2009                          377,454
                2010 and thereafter           276,969
                                           ----------
                                           $2,012,451
                                           ==========

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


NOTE 20. 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 21 - 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.


                                       57
<PAGE>

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.

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 22 - 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 23. 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:


                                       58
<PAGE>
<TABLE>
<CAPTION>
                                                                      CURRENT
                                                                       PERIOD
                                                       2004           CHANGES              2005
                                                   -----------       -----------       -----------

<S>                                                <C>               <C>               <C>
Deferred tax assets:
Accrued compensation                               $   345,533       $   855,601       $ 1,201,134
Allowance for doubtful accounts                        171,254          (335,749)         (164,495)
Consulting services elected as start-up costs
under IRC Sec. 195(b)                                  671,758           598,370         1,270,128
Accumulated depreciation                               (10,521)              252           (10,269)
Net operating loss carryforwards                     3,985,383         3,546,818         7,532,201
                                                   -----------       -----------       -----------
                                                     5,163,407         4,665,292         9,828,699
Valuation allowance                                 (5,163,407)       (4,665,292)       (9,828,699)
                                                   -----------       -----------       -----------
Net deferred tax asset                             $        --       $        --       $        --
                                                   ===========       ===========       ===========
</TABLE>

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 at federal statuatory rate  $(3,546,818)      $  (930,379)
Accrued salaries                                 1,201,134            27,505
Allowance for doubtful accounts                   (164,495)         (107,345)
Depreciation                                       (10,269)           (7,179)
Losses not benefited                             2,520,448         1,017,398
                                               -----------       -----------
                                                        --                --
                                               ===========       ===========

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  $50,214,672,
which expire at various dates through 2021.


                                       59
<PAGE>
NOTE 24. 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:

* PLEASE REFER TO NOTE ON PAGE 63.

<TABLE>
<CAPTION>
Date Issued            Shares       Consideration                Valuation    Relationship
---------------      ----------     -----------------------    -----------    ------------------------------------
<S>                  <C>            <C>                        <C>            <C>
March 14, 2003        2,200,000     Consulting services        $    22,000    Consultant

March 14, 2003        1,800,000     Investment banking              18,000    Consultant

May 7, 2003           1,100,000     Consulting services             11,550    Consultant

May 7, 2003             900,000     Investment banking               9,450    Consultant

May 22, 2003          2,500,000     Loan Collateral                      *    Note Holder

May 22, 2003          2,500,000     Loan Collateral                      *    Note Holder

May 22, 2003         15,000,000     Conversion of debt             239,206    Investor

May 29, 2003          4,000,000     Satisfaction of debt            55,000    Shareholder/Former director

July 18, 2003           200,000     Severance pay                    6,000    Employee

July 18, 2003           500,000     Severance pay                   15,000    Employee

July 18, 2003           500,000     Severance pay                   15,000    Employee

July 18, 2003           450,000     Legal services                  13,500    Legal counsel/former corp. secretary

July 18, 2003           800,000     Consulting services             24,000    Consultant/employee

July 18, 2003        12,844,000     Conversion of debt             256,880    Investor

August 5, 2003       20,080,321     Sale of stock                  500,000    Investor/consultant

August 5, 2003               --     Marketing services             100,402    Investor/consultant

August 8, 2003        3,400,000     Consulting services            102,000    Consultant/employee

August 28, 2003      42,916,666)    Return of shares issued              *    Note Holders
                                      for loan collateral

August 28, 2003              --     Conversion of debt             125,000    Investor

August 28, 2003              --     Conversion of debt             250,000    Investor/consultant

August 28, 2003              --     Conversion of debt             125,000    Investor

August 28, 2003              --     Conversion of debt             250,000    Investor

September 3, 2003       944,444     Consulting services             11,806    Consultant

September 3, 2003       900,000     Consulting services             11,250    Consultant

September 3, 2003     1,100,000     Consulting services             13,750    Consultant

September 3, 2003     3,847,222     Consulting services             49,090    Consultant

September 29, 2003      656,687     Consulting services              8,211    Consultant

October 9, 2003       4,281,333     Additional shares due                *    Investor
                                      For Conversion of debt

October 9, 2003       3,650,000     Consulting services             73,000    Consultant/employee

October 9, 2003       2,000,000     Officer's salary                40,000    Chief Financial Officer

December 31, 2003     7,500,000     Officer's salary               112,500    Chief Executive Officer

December 31, 2003     1,166,667     Officer's salary                17,500    Chief Financial Officer

December 31, 2003    (4,000,000)    Return of shares issued              *    Note Holder
                                      for loan collateral
</TABLE>


                                       60
<PAGE>
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:

<TABLE>
<CAPTION>
DATE ISSUED           SHARES                   CONSIDERATION                        VALUATION              RELATIONSHIP
----------------- ------------ -------------------------------------------------- ------------- -----------------------------------
<S>                <C>          <C>                                               <C>           <C>
Jan. 15, 2004        4,500,000  Exercised Stock Options                               *          Chief Executive Officer / Director
Jan. 15, 2004        5,166,666  Exercised Stock Options                               *          Chief Financial Officer
Jan. 15, 2004        2,000,000  Exercised Stock Options                               *          Director/Former President
Jan. 15, 2004        9,000,000  Exercised Stock Options                               *          Chief Operating Officer / Director
                                                                                                 President / Director / Former
Jan. 15, 2004        1,000,000  Exercised Stock Options                               *          Consultant
Jan. 15, 2004        2,666,667  Exercised Stock Options                               *          Vendor
Feb. 3, 2004         3,202,180  Exercised Stock Options                               *          Chief Executive Officer / Director
Feb. 3, 2004         1,243,847  Exercised Stock Options                               *          Chief Financial Officer
Feb. 3, 2004         2,003,106  Exercised Stock Options                               *          Chief Operating Officer / Director
Feb. 3, 2004         6,410,513  Exercised Stock Options                               *          Employee
Feb. 3, 2004         1,458,333  Exercised Stock Options                               *          Accountant
Feb. 4, 2004        20,796,483  Exercised Stock Options                               *          Director/Former President
Feb. 4, 2004        16,500,000  Investment in Unconsolidated Foreign Subsidiary       *          Investee
Feb. 5, 2004         3,500,000  Investment in Unconsolidated Foreign Subsidiary       *          Creditor of Investee
Feb. 17, 2004        9,100,000  Consulting Services                                     425,000  Director (COB) / Former Consultant
May 11, 2004           108,333  Marketing Services                                        6,500  Consultant
                                                                                                 Shareholders of Selling
May 12, 2004        28,000,000  Sanswire Assets Acquisition                           2,800,000  Corporation
May 25, 2004         1,352,528  Investment Banking Fees                                  67,626  Investment Banker
May 25, 2004           676,264  Investment Banking Fees                                  33,813  Investment Banker
May 25, 2004         1,352,528  Investment Banking Fees                                  67,626  Investment Banker
July 29, 2004        1,500,000  Compensation                                            144,000  Employee
July 29, 2004          500,000  Compensation                                             48,000  Employee
July 29, 2004          500,000  Compensation                                             48,000  Employee
                                                                                                 President / Former Consultant (as
Aug. 12, 2004        2,000,000  Consulting Services                                     192,000  Nominee)
                                                                                                 Chief Technology Officer / Former
Aug. 12, 2004        2,000,000  Consulting Services                                     192,000  Consultant (as Nominee)
Aug. 12, 2004          175,000  Compensation                                              7,000  Employee
Sep. 28, 2004        2,000,000  Stratodyne Assets Acquisition                         *          Shareholder of Selling Corporation
                                                                                                 Preferred Series-A Shareholder /
Nov. 4, 2004         7,800,000  Convert Pfd. Ser. A (received as broker fee).         *          Investment Banker
Nov. 4, 2004         5,200,000  Convert Pfd. Ser. A                                   *          Preferred Series-A Shareholders
                                                                                                 Preferred Series-A Shareholder /
Nov. 17, 2004       26,000,000  Convert Pfd. Ser. A (received as broker fee).         *          Investment Banker
Nov. 17, 2004       20,800,000  Convert Pfd. Ser. A                                   *          Preferred Series-A Shareholders

Nov. 17, 2004       10,920,000  Convert Pfd. Ser. A                                     157,500  Preferred Series-A Shareholders
Nov. 18, 2004        1,560,000  Convert Pfd. Ser. A                                      22,500  Preferred Series-A Shareholders
Nov. 19, 2004        9,360,000  Convert Pfd. Ser. A                                     135,000  Preferred Series-A Shareholders
Nov. 23, 2004        7,800,000  Convert Pfd. Ser. A                                     112,500  Preferred Series-A Shareholders
Nov. 24, 2004        1,560,000  Convert Pfd. Ser. A                                      22,500  Preferred Series-A Shareholders
Nov. 30, 2004        9,360,000  Convert Pfd. Ser. A                                     135,000  Preferred Series-A Shareholders
Dec. 1, 2004        31,200,000  Convert Pfd. Ser. A                                     450,000  Preferred Series-A Shareholders
Dec. 3, 2004         1,560,000  Convert Pfd. Ser. A                                      22,500  Preferred Series-A Shareholders
Dec. 8, 2004         6,240,000  Convert Pfd. Ser. A                                      90,000  Preferred Series-A Shareholders
Dec. 10, 2004       12,480,000  Convert Pfd. Ser. A                                     180,000  Preferred Series-A Shareholders
Dec. 28, 2004        6,240,000  Convert Pfd. Ser. A                                      90,000  Preferred Series-A Shareholders
Dec. 30, 2004        1,560,000  Convert Pfd. Ser. A                                      22,500  Preferred Series-A Shareholders
                                Return of shares originally issued for Sanswire                  Shareholders of Selling
Dec. 31, 2004      (28,000,000) and Stratodyne Assets                                (2,800,000) Corporations
                                                                                                 Shareholders of Selling
Dec. 31, 2004       26,000,000  Reissuance of shares for Sanswire Assets              2,600,000  Corporation
Dec. 31, 2004        2,000,000  Reissuance of shares for Stratodyne Assets              200,000  Shareholder of Selling Corporation
Dec. 31, 2004        3,000,000  Consulting Services                                     135,000  Consultant
Dec. 31, 2004        3,000,000  Consulting Services                                     135,000  Consultant
Dec. 31, 2004          500,000  Consulting Services                                      22,500  Consultant
Dec. 31, 2004          500,000  Consulting Services                                      22,500  Consultant
</TABLE>


                                       61
<PAGE>
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:

<TABLE>
<CAPTION>

 DATE ISSUED       SHARES                      CONSIDERATION                     VALUATION                  RELATIONSHIP
---------------  -----------  ------------------------------------------------ ------------- --------------------------------------
<S>                <C>        <C>                                               <C>          <C>
      2/9/2005       208,000  Converted Preferred Series A                          $36,000  Preferred Series-A Shareholders
     2/14/2005       520,000  Converted Preferred Series A                          $90,000  Preferred Series-A Shareholders
     2/18/2005        84,500  Converted Preferred Series A Shares Received          *        Broker / Preferred Series-A
                              as Broker Fee                                                    Shareholders
     2/24/2005       251,421  Converted Notes Payable and Accrued Interest         $301,706  Convertible Note Holder
     2/24/2005       471,415  Converted Notes Payable and Accrued Interest         $565,698  Convertible Note Holder
     2/24/2005       157,138  Converted Notes Payable and Accrued Interest         $188,566  Convertible Note Holder
     2/24/2005        33,333  Broker Fee                                            *        Broker / Convertible Note Holder
     2/24/2005       625,000  Convert Note Payable and Accrued Interest            $750,000  Convertible Note Holder
     2/25/2005     1,575,833  Converted Preferred Series A Shares Received          *        Broker / Preferred Series-A
                              as Broker Fee                                                     Shareholders
     2/25/2005        33,333  Broker Fee                                            *        Broker / Convertible Note Holder
      3/3/2005     1,040,000  Converted Preferred Series A                         $180,000  Preferred Series-A Shareholders
      3/3/2005        33,333  Exercised Warrants                                    $61,325  Broker / Convertible Note Holder
      3/3/2005       260,417  Exercised Warrants                                   $429,688  Convertible Note Holder turned
                                                                                                Stockholder
      3/3/2005        86,806  Exercised Warrants                                   $143,229  Convertible Note Holder turned
                                                                                                Stockholder
      3/3/2005       138,889  Exercised Warrants                                   $229,165  Convertible Note Holder turned
                                                                                                Stockholder
      3/6/2005        80,555  Exercised Warrants                                   $132,916  Convertible Note Holder turned
                                                                                                Stockholder
      3/7/2005       485,333  Converted Preferred Series A Shares Received          *        Preferred Series-A Shareholders
                              as Broker Fee
      3/7/2005             -  Converted Preferred Series A - Additional              $9,000  Preferred Series-A Shareholders
                              Proceeds
      3/7/2005        66,667  Exercised Warrants                                   $110,000  Convertible Note Holder turned
                                                                                                Stockholder
     3/10/2005        66,667  Exercised Warrants                                   $110,000  Convertible Note Holder turned
                                                                                                Stockholder
     3/11/2005        80,000  Consulting Services                                  $358,200  Consultant / Legal Counsel
     3/11/2005        80,000  Consulting Services                                  $358,200  Former Consultant / Current
                                                                                               Executive Vice President
     3/11/2005       200,000  Costs of Sales                                       $450,000  Vendor
     3/14/2005        66,667  Exercised Warrants                                   $110,000  Convertible Note Holder turned
                                                                                                Stockholder
     3/14/2005       500,000  Exercised Stock Options                               *        CEO
     3/14/2005       280,216  Exercised Stock Options                               *        CFO
     3/21/2005       369,022  Exercised Stock Options                               *        COO
     3/21/2005       172,065  Exercised Stock Options                               *        CTO
     3/21/2005       100,000  Exercised Stock Options                               *        Former Director
     3/22/2005        37,832  Exercised Stock Options                               *        Employee
     3/22/2005        10,378  Exercised Stock Options                               *        Employee
     3/22/2005         8,211  Exercised Stock Options                               *        Employee
     3/22/2005         7,738  Exercised Stock Options                               *        Employee
     3/22/2005         6,388  Exercised Stock Options                               *        Employee
     3/22/2005         8,097  Exercised Stock Options                               *        Employee
     3/22/2005         1,363  Exercised Stock Options                               *        Employee
     3/22/2005           945  Exercised Stock Options                               *        Employee
     3/22/2005         1,052  Exercised Stock Options                               *        Employee
     3/22/2005           310  Exercised Stock Options                               *        Employee
     3/28/2005       211,734  Exercised Stock Options                               *        Employee
      4/6/2005             -  Exercised Warrants - Additional Proceeds           $1,347,500  Convertible Note Holder turned
                                                                                                Stockholder
     4/12/2005        33,333  Exercised Warrants                                    $61,325  Convertible Note Holder turned
                                                                                                Stockholder
     4/15/2005         8,892  Exercised Stock Options                               *        Employee
     4/15/2005         8,527  Exercised Stock Options                               *        Employee
     4/15/2005         8,715  Exercised Stock Options                               *        Director
     4/15/2005         5,790  Exercised Stock Options                               *        Employee
     4/15/2005         6,151  Exercised Stock Options                               *        Employee
    4/ 27/2005        12,897  Exercised Stock Options                               *        Senior Vice President
      5/4/2005       174,790  Additional Shares Issued per Anti-dilutive                     Convertible Note Holder turned
                                Agreement                                           *            Stockholder
      5/6/2005       291,317  Additional Shares Issued per Anti-dilutive                     Convertible Note Holder turned
                                Agreement                                           *            Stockholder
     5/12/2005       103,950  Stock for Cash                                       $300,000  Investors
     5/12/2005       346,500  Stock for Cash                                     $1,000,000  Investors
     5/12/2005        86,667  Stock for Cash                                       $250,120  Investors
     5/12/2005        86,667  Stock for Cash                                       $250,120  Investors
     5/12/2005        17,325  Stock for Cash                                        $50,000  Investors
     5/12/2005        86,625  Stock for Cash                                       $250,000  Investors
     5/12/2005         6,930  Stock for Cash                                        $20,000  Investors
     5/12/2005        27,720  Stock for Cash                                        $80,000  Investors
     5/12/2005         3,333  Stock for Cash                                         $9,620  Investors
     5/12/2005         3,333  Stock for Cash                                         $9,620  Investors
     5/12/2005        34,650  Stock for Cash                                       $100,000  Investors
     5/12/2005        13,333  Stock for Cash                                        $38,480  Investors
     5/17/2005       650,000  Converted Preferred Series A                         $112,500  Preferred Series-A Shareholders
     5/27/2005        86,625  Stock for Cash                                       $250,000  Investors
     5/27/2005       250,000  Consulting Services                                  $905,000  Former Consultant - Corporation owned
                                                                                             by current Executive Vice President
      6/8/2005       350,000  Consulting Services                                  $969,500  Consultant/Legal Counsel
     6/13/2005        22,500  Shares Received as Converted Preferred Series A       *        Broker/Preferred Series-A Shareholders
     6/13/2005     2,444,167  Converted Preferred Series A Shares Received          *        Broker/Preferred Series-A Shareholders
                              as Broker Fee
     6/14/2005         4,353  Exercised Stock Options                               *        Employee
     6/27/2005        33,334  Sales Commissions                                    $100,000  Affiliate
     6/30/2005       170,000  Legal Services                                       $493,000  Consultant/Legal Counsel
      7/5/2005        14,815  Exercised Stock Options                               *        Consultant
      7/5/2005         8,334  Employment Signing Bonus                              $25,000  Employee of Sanswire
      7/5/2005         1,000  Services - Performance bonus                           $3,000  Employee of Sanswire
      7/5/2005           334  Services - Performance bonus                           $1,000  Employee of Sanswire
      7/5/2005           334  Services - Performance bonus                           $1,000  Employee of Sanswire
      7/5/2005           334  Services - Performance bonus                           $1,000  Employee of Sanswire
      7/5/2005           334  Services - Performance bonus                           $1,000  Employee of Sanswire
      7/5/2005           334  Services - Performance bonus                           $1,000  Employee of Sanswire
      7/5/2005           334  Services - Performance bonus                           $1,000  Employee of Sanswire
      7/5/2005           334  Services - Performance bonus                           $1,000  Employee of Sanswire
      7/5/2005           334  Services - Performance bonus                           $1,000  Employee of Sanswire
      7/5/2005           334  Services - Performance bonus                           $1,000  Employee of Sanswire
      7/5/2005           334  Services - Performance bonus                           $1,000  Employee of Sanswire
      7/5/2005           334  Services - Performance bonus                           $1,000  Employee of Sanswire
      7/5/2005           334  Services - Performance bonus                           $1,000  Employee of Sanswire
      8/5/2005        20,001  Sales Commissions                                     $37,402  Affiliate / Vendor
      8/5/2005        13,333  Sales Commissions                                     $24,933  Affiliate / Vendor
      9/6/2005        38,730  Equipment Purchase                                    $58,206  Affiliate / Vendor
      9/8/2005       100,000  Conversion of Preferred Series C to Common           $150,000  Relation to Investment
                              Stock                                                             Banker/Consultant
      9/8/2005       720,000  Conversion of Preferred Series C to Common         $1,080,000  Investment Banker / Consultant
                              Stock
      9/8/2005         3,166  Services - Performance bonus                           $4,750  Employee of Sanswire
      9/8/2005       133,334  Employment Signing Bonus                             $200,000  Employee
     9/13/2005        98,983  Employment Severance Agreement                       $177,400  Former Employee
     9/27/2005       185,185  Board Member Referral Fee                            $275,926  Consultant / Board Member
     9/30/2005     1,881,317  Converted Preferred Series A                         $270,000  Preferred Series-A Shareholders
     9/30/2005        36,667  Officer Salary Adjustment                             $55,000  Former President / Director
     9/30/2005        33,611  Officer Salary Adjustment                             $50,000  Former President / Director
     9/30/2005        12,500  Director Fees                                         $18,750  Former President / Director
     10/7/2005       350,000  Consulting Services                                  $458,500  Corporation Owned by Former Consultant
                                                                                              / Current Executive Vice President
     11/2/2005        28,201  Exercised stock options                               $53,300  Employee
    11/17/2005       500,000  Conversion of Preferred Series C                     $250,000  Chief Operating Officer
    11/28/2005         9,333  Exercised Warrants                                    $15,399  Stockholder / Warrant Holder
    11/28/2005         2,333  Exercised Warrants                                     $3,849  Stockholder / Warrant Holder
    11/28/2005        60,638  Exercised Warrants                                   $100,053  Stockholder / Warrant Holder
    11/28/2005         4,851  Exercised Warrants                                     $8,004  Stockholder / Warrant Holder
    11/28/2005        72,765  Exercised Warrants                                   $120,062  Stockholder / Warrant Holder
    11/28/2005         2,333  Exercised Warrants                                     $3,849  Stockholder / Warrant Holder
    11/28/2005        69,546  Exercised Warrants                                   $114,751  Stockholder / Warrant Holder
    11/29/2005        72,766  Exercised Warrants                                   $120,064  Stockholder / Warrant Holder
    11/30/2005        19,404  Exercised Warrants                                    $32,017  Stockholder / Warrant Holder
     12/1/2005       242,550  Exercised Warrants                                   $400,208  Stockholder / Warrant Holder
     12/2/2005        24,255  Exercised Warrants                                    $40,021  Stockholder / Warrant Holder
     12/2/2005        60,667  Exercised Warrants                                   $100,101  Stockholder / Warrant Holder
     12/5/2005        60,667  Exercised Warrants                                   $100,101  Stockholder / Warrant Holder
     12/8/2005     1,857,350  Conversion of Note Payable and Accrued Interest    $3,064,628  Convertible Note Holder turned
                                                                                                Stockholder
     12/8/2005       306,860  Conversion of Note Payable and Accrued Interest      $506,319  Convertible Note Holder turned
                                                                                                Stockholder
    12/16/2005       100,000  Exercised Warrants                                   $250,000  Stockholder / Warrant Holder
    12/19/2005       100,000  Exercised Warrants                                   $250,000  Stockholder / Warrant Holder
    12/21/2005        72,727  Exercised Warrants                                   $181,818  Stockholder / Warrant Holder
    12/22/2005        81,168  Travel Services                                      $125,000  Corporation Owned by Former Consultant
                                                                                              / Current Executive Vice President
    12/27/2005       291,961  Conversion of Note Payable and Accrued Interest      $481,736  Convertible Note Holder turned
                                                                                                Stockholder
    12/31/2005    12,931,334  Conversion of Preferred Series B                   $8,435,200  Preferred Stockholder
    12/31/2005       308,712  Conversion of Note Payable and Accrued Interest      $509,375  Convertible Note Holder turned
                                                                                                Stockholder
    12/27/2005        21,429  Officer Salary                                        $60,000  Chief Executive Officer / Director
    12/27/2005        19,643  Officer Salary                                        $55,000  Chief Financial Officer
    12/27/2005         9,821  Officer Salary                                        $27,500  Corp. Secretary / Director
    12/27/2005        19,643  Officer Salary                                        $55,000  Chief Operating Officer
    12/27/2005        19,643  Officer Salary                                        $55,000  Chief Technology Officer
    12/27/2005        19,643  Officer Salary                                        $55,000  Former Chief Operating
                                                                                                Officer / Director
    12/27/2005         9,821  Officer Salary                                        $27,500  Senior Vice-President of Finance
</TABLE>


                                       62
<PAGE>
* 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.

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.


                                       63
<PAGE>
NOTE 25. 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:

<TABLE>
<CAPTION>
Date Issued              Shares   Consideration           Valuation   Relationship
------------------   ----------   --------------------   ----------   -----------------------
<S>                  <C>          <C>                       <C>       <C>
September 26, 2003    2,206,667   Satisfaction of debt       33,100   Former President

September 26, 2003   17,600,000   Accrued salary            264,200   Former President

September 26, 2003    8,944,467   Accrued salary            134,167   Chief Executive Officer

September 26, 2003    7,444,467   Accrued salary            111,667   Chief Operating Officer

September 26, 2003    7,444,467   Accrued salary            111,667   Chief Financial Officer

September 26, 2003    4,111,133   Accrued salary             61,667   Controller

December 18, 2003     6,666,667   Officer salary            100,000   Former President

December 18, 2003     5,333,333   Officer salary             80,000   Chief Operating Officer

December 18, 2003     3,333,333   Salary                     50,000   Former Controller

December 18, 2003     1,000,000   Officer salary             15,000   President

December 18, 2003     1,666,667   Accounting services        25,000   Accountants

December 18, 2003     2,666,667   Network services           40,000   Vendor
</TABLE>

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.

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:

<TABLE>
<CAPTION>
Date Issued             Shares   Consideration                    Valuation   Relationship
-----------------   ----------   -----------------------------   ----------   --------------------------------------------
<S>                 <C>          <C>                              <C>          <C>
December 31, 2004      479,778   Accrued Board Member Stipends       18,750   Chief Executive Officer/Director

December 31, 2004      479,778   Accrued Board Member Stipends       18,750   Director (COB)/Former Consultant

December 31, 2004      479,778   Accrued Board Member Stipends       18,750   Chief Operating Officer/Director

December 31, 2004      479,778   Accrued Board Member Stipends       18,750   Director/Former President

December 31, 2004      479,778   Accrued Board Member Stipends       18,750   President/Director/Former Consultant

December 31, 2004      479,778   Accrued Board Member Stipends       18,750   Director/Former President of Subsidiary

December 31, 2004      479,778   Accrued Board Member Stipends       18,750   Director

December 31, 2004      359,833   Accrued Board Member Stipends       14,065   Chief Financial Officer

December 31, 2004    4,444,444   Bonus                              200,000   Chief Executive Officer/Director

December 31, 2004    3,888,889   Bonus                              175,000   Chief Financial Officer

December 31, 2004    3,888,889   Bonus                              175,000   Chief Operating Officer/Director

December 31, 2004      694,444   Bonus                               31,250   Chief Technology Officer/Former Consultant

December 31, 2004      833,333   Bonus                               37,500   Senior Vice-President

December 31, 2004    2,777,778   Bonus                              125,000   President/Director/Former Consultant

December 31, 2004    1,444,444   Bonus                               65,000   Employee

December 31, 2004    2,444,444   Bonus                              110,000   Employee

December 31, 2004      670,556   Bonus                               30,175   Employee

December 31, 2004      530,556   Bonus                               23,875   Employee

December 31, 2004      500,000   Bonus                               22,500   Employee

December 31, 2004      412,720   Bonus                               18,572   Employee

December 31, 2004      523,144   Bonus                               23,541   Employee

December 31, 2004       88,040   Bonus                                3,962   Employee

December 31, 2004      281,250   Bonus                               12,656   Employee

December 31, 2004       61,040   Bonus                                2,747   Employee

December 31, 2004       68,000   Bonus                                3,060   Employee

December 31, 2004       20,000   Bonus                                  900   Employee

December 31, 2004      550,922   Bonus                               24,791   Employee of Subsidiary

December 31, 2004       83,333   Bonus                                3,750   Former Employee of Subsidiary

December 31, 2004      374,078   Bonus                               16,834   Employee of Subsidiary

December 31, 2004      574,533   Bonus                               25,854   Employee of Subsidiary

December 31, 2004      397,456   Bonus                               17,886   Former Employee of Subsidiary

December 31, 2004      277,778   Bonus                               12,500   Employee of Subsidiary

December 31, 2004      133,333   Bonus                                6,000   Employee of Subsidiary

December 31, 2004      116,667   Bonus                                5,250   Employee of Subsidiary

December 31, 2004      185,189   Bonus                                8,334   Employee of Subsidiary

December 31, 2004      222,222   Amount owed for services            10,000   Accountant

December 31, 2004   31,519,878   Officer Stock Option Grant       1,418,394   Chief Executive Officer / Director

December 31, 2004   21,013,252   Officer Stock Option Grant         945,596   Chief Operating Officer / Director

December 31, 2004   15,759,939   Officer Stock Option Grant         709,197   Chief Financial Officer

December 31, 2004   10,506,626   Officer Stock Option Grant         472,798   Director/Former President

December 31, 2004   10,506,626   Officer Stock Option Grant         472,798   President / Director / Former Consultant

December 31, 2004   10,506,626   Officer Stock Option Grant         472,798   Chief Technology Officer / Former Consultant
</TABLE>


                                       64
<PAGE>
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.

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:

<TABLE>
<CAPTION>
Date Issed      Shares           Consideration           Valuation    Relationship
----------    ---------   ----------------------------   ----------   -------------------------------------------------
<S>           <C>         <C>                            <C>          <C>
 9/27/2005       81,481   Additional stock options per   $   55,000   Former President / Director settlement agreement.
 9/27/2005    1,542,176   Settlement Agreement           $1,256,873   Consultant / Affiliate of Former President
 12/9/2005       37,500   Director Bonus                 $   55,875   Former Director
 12/9/2005       30,000   Director Severance             $   29,700   Former Director
12/31/2005    2,945,763   Officer Stock Option Grant     $1,988,390   Chief Executive Officer / Director
12/31/2005    1,963,842   Officer Stock Option Grant     $1,325,593   Chief Operating Officer /Director
12/31/2005    1,472,882   Officer Stock Option Grant     $  994,195   Chief Financial Officer
12/31/2005      490,961   Officer Stock Option Grant     $  331,398   Director/Former President
12/31/2005      981,921   Officer Stock Option Grant     $  662,797   Chief Technology Officer /Former Consultant
12/31/2005      981,921   Officer Stock Option Grant     $  662,797   Chief Operating Officer
12/31/2005    2,454,803   Officer Stock Option Grant     $4,394,097   Director
</TABLE>

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.

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.


                                       65
<PAGE>
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 26 - 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.

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.


                                       66
<PAGE>
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.

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.


                                       67
<PAGE>
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 1000  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.

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


NOTE 27. 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.


                                       68
<PAGE>
<TABLE>
<CAPTION>
2005                                             TELECOM        SANSWIRE      UNALLOCATED        TOTALS
-------------------------------------------   ------------    ------------   ------------    ------------
<S>                                           <C>             <C>             <C>             <C>
Revenues Earned                               $ 81,135,194              --    $      8,644    $ 81,143,838
Cost of Revenue Earned                          80,721,806              --           8,335      80,730,141
                                              ------------    ------------    ------------    ------------
GROSS MARGIN(LOSS)                                 413,388              --             309         413,697
                                              ------------    ------------    ------------    ------------
Expenses                                         2,355,398       4,300,866      23,970,231      30,626,495
Loss Before Other Income (Expense) and
Income Taxes                                    (1,942,010)     (4,300,866)    (23,969,922)    (30,212,798)
Other Income (Expenses)                         (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                               $ 28,996,213              --              --    $ 28,996,213

Cost of Revenue Earned                          29,187,414              --              --      29,187,414
                                              ------------    ------------    ------------    ------------
GROSS MARGIN(LOSS)                                (191,201)             --              --        (191,201)
                                              ------------    ------------    ------------    ------------
Expenses                                           901,076         746,827      11,202,347      12,850,250
Loss Before Other Income (Expense) and
Income Taxes                                    (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)
                                              ============    ============    ============    ============
</TABLE>


NOTE 28 - SUBSEQUENT EVENTS

In January 2006,  investors  exercised all of the outstanding  2,727,273 Class A
Warrants at $2.50 per share for gross proceeds of  $6,818,183.  The Company also
agreed to issue the investors a total of 1,935,606 new warrants with an exercise
price of $4.00 per share, and the warrants expire on August 31, 2008.

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.


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

None.


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 the Company's  management,  including
the Chief Executive  Officer and President and the Chief Financial  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 Chief
Executive  Officer and the Chief Financial Officer concluded that as of December
31, 2005, the Company's  disclosure  controls and procedures  were effective (at
the "reasonable  assurance"  level mentioned  above) 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.


                                       69
<PAGE>
From time to time,  the  Company  and its  management  have  conducted  and will
continue  to  conduct  further  reviews  and,  from  time to time  put in  place
additional  documentation,  of the Company's disclosure controls and procedures,
as well as its internal control over financial  reporting.  The Company may from
time to time make changes  aimed at enhancing  their  effectiveness,  as well as
changes aimed at ensuring that the Company's  systems  evolve with, and meet the
needs of, the Company's business. These changes may include changes necessary or
desirable to address  recommendations of the Company's  management,  its counsel
and/or  its  independent   auditors,   including  any   recommendations  of  its
independent  auditors  arising out of their audits and reviews of the  Company's
financial  statements.  These  changes may include  changes to the Company's own
systems,  as well as to the systems of businesses  that the Company has acquired
or that the Company may acquire in the future and will,  if made, be intended to
enhance the effectiveness of the Company's controls and procedures.  The Company
is  also  continually   striving  to  improve  its  management  and  operational
efficiency  and the  Company  expects  that its efforts in that regard will from
time to time directly or indirectly affect the Company's disclosure controls and
procedures, as well as the Company's internal control over financial reporting.

As the Company moves  successfully  forward along its various product lines, new
people have joined the Company while others have been assigned new and expanding
responsibilities.  In addition to  establishing  up-to-date  financial  controls
throughout  the Company to reflect this new  organization  and expanding  market
development,  GlobeTel has updated various standards and compliance  measures to
reflect its emerging global presence.

This  includes a strict  adherence  to the  Foreign  Corrupt  Practices  act, an
updated  and  enhanced  Code  of  Conduct  and  Business  Ethics  as well as its
Corporate  Governance  Statement.  We  have  made  significant  changes  in  the
Company's internal controls that have affected the internal controls  subsequent
to the  date  of the  evaluation.  We have  established  a  financial  reporting
controls committee, which meets quarterly to address corporate financial issues.
We  have  added  two  more  employees  to its  accounting  staff,  including  an
experienced full-time Controller and Accountant. Additionally, we have purchased
a  financial  reporting  software  tool to help  analyze  financial  data and to
expedite  the  consolidation  and  reporting  process.  We have  purchased a new
integrated  accounting system which will be implemented during the first quarter
of 2006.  In addition,  the Company  hired a  consultant  to perform an internal
control review for the purpose of evaluating the Company's internal controls. As
a result,  additional controls and procedures were implemented.  The Company has
also  restructured  departmental  responsibilities  and  instituted  a budgeting
process.


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.

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.


                                       70
<PAGE>
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                             Term
---------------------     ---    ----------------------------------   --------
J. Randolph Dumas          59    Executive Vice Chairman              One Year
Dorian Klein               47    Director                             One Year
Kyle McMahan               48    Director                             One Year
Michael P. Castellano      64    Director                             One Year
Timothy M. Huff            41    Chief Executive Officer & Director   One Year
Mitchell A. Siegel         59    Vice President & Director            One Year
Jonathan Leinwand          35    Secretary to the Board, Director     One Year
Thomas Y. Jimenez          47    Chief Financial Officer              One Year
Lawrence Lynch             54    Chief Operating Officer              One Year
Joseph Seroussi            56    Chief Technical Officer              One Year
Steven King                38    Senior Vice President                One Year

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.

Sir Christopher Meyer,  Chairman, was first elected to the Board of Directors in
September 2005. Sir Christopher  joined the British  Diplomatic Service where he
quickly rose through the ranks through a succession of increasingly  responsible
positions in key countries around the world, starting in Moscow, and then Madrid
and  later,  in  London,  where he served as Head of the  Soviet  Section of the
Foreign  Office.  He then became Chief Speech  Writer to the Foreign  Secretary,
working  for three  Foreign  Secretaries:  Lord  James  Callaghan  (later  Prime
Minister);  Anthony  Crosland;  and Lord David Owen. From there, Sir Christopher
was posted to  Brussels  where he was active in the UK's  representation  to the
European Union (EU) specializing in trade policy and later returned to Moscow in
1982 as Political  Counselor.  Upon returning to London, he was appointed to the
position  of  Foreign  Office  Spokesman  and  Press  Secretary  to the  Foreign
Secretary (similar to the U.S. Secretary of State),  later Lord Geoffrey Howe of
Aberavon.  From  1988-1989,  Sir  Christopher  was a Visiting  Fellow at Harvard
University's  Centre for International  Affairs and, upon completion,  was named
Minister  for  Trade  Policy  in  Washington  D.C.  Shortly  thereafter,  he was
appointed Deputy Head of Mission at the Embassy in Washington. Upon returning to
London,  he served two years as  Government  Spokesman  and Press  Secretary  to
then-Prime Minister,  John Major, prior to his appointment as U.K. Ambassador to
the Federal  Republic of Germany in Bonn. In 1997, Sir Christopher was appointed
Ambassador to the U.S., the most senior position in the U.K. Diplomatic Service,
where he served until 2003, the longest single tenure since World War II.

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. However, on March 23, 2006, Sir Christopher Meyer decided
to accept a new role as Chairman  of the  Company's  newly-formed  International
Advisory Board.

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, as of March 20, 2006.


                                       71
<PAGE>
J.  Randolph  Dumas,  Vice  Chairman,  became the  Managing  Partner of Sanswire
Europe, a partnership with Sanswire LLC, in July 2005. Having joined GlobeTel in
November  2005,  he has served as a member of the Board of Directors of GlobeTel
Communications since December 2005. Mr. Dumas served as a Naval Aviation Officer
during the Viet Nam War Era and, later,  served as a briefing officer within the
Central  Intelligence  Agency in Washington  D.C.  before  attending The Wharton
School  where he  completed  his MBA  degree in finance  in 1977.  Currently,  a
resident of London,  England - he has lived and worked in Europe for the past 25
years. He became a senior Managing  Director at Salomon  Brothers  International
Limited where he was  responsible  for the firm's  European  corporate  finance,
mortgage  securities and real estate investment  banking businesses for a number
of years. Subsequently, Mr. Dumas founded and became the Managing Partner of two
prominent  private equity firms:  Dumas West & Co. (a 50:50 partnership with the
"Baby Bell"  telecommunications  company, US West) and Rubikon Partners,  a firm
focusing  on  European  leveraged  buyouts  founded  by  Mr.  Dumas,  Dr.  Henry
Kissinger, Thomas F. McLarty III (President Clinton's Chief of Staff) and Leo A.
Daly III.  Mr. Dumas has had  extensive  experience  working in virtually  every
business  sector and in every  country  within  Europe,  Asia and in much of the
Middle East. He maintains strong relationships in these countries at the highest
levels.

Michael P. Castellano is a certified  public  accountant with more than 40 years
of  experience  in the  financial  sector.  His  distinguished  career  includes
executive  positions in corporate  accounting,  finance,  and  administration at
renowned  companies  such  as  Avis,  Inc.,  E.F.  Hutton,  Inc.,  and  Fidelity
Investments.  At Fidelity, he held the positions of Vice President and Corporate
Controller and was later  appointed  Senior Vice President and Chief  Accounting
Officer of the Fidelity  Institutional  Group.  Later  assignments  included the
positions of Executive Vice President and Chief Administrative Officer at Kobren
Insight Group where he became a member of the Board of Directors in 1997. He was
also a director and head of the Audit Committee for Puradyn Filter  Technologies
from 2001 through 2005 and ResortQuest International,  a New York Stock Exchange
listed property  management  company,  from 2002 until November 2003 when it was
acquired by Gaylord Entertainment. Mr. Castellano currently serves as a director
and  chairman of the Audit  Committees  of Sona Mobile and Sun Capital  Advisers
Trust.

Dorian Klein has more than 25 years of professional  experience in international
finance and investments.  He has a distinguished  record as an investment banker
having  worked for more than 20 years in New York,  London and Tokyo,  including
roles as Managing Director and Head of European Structured and Principal Finance
at Merrill Lynch in London and as Managing Director and Head of Asset Finance at
Bankers Trust in London.  He also headed the Tokyo office of a highly successful
boutique  investment  bank that he  co-founded  with his  colleagues  from Paine
Webber during the 80s. During his career as an international  investment banker,
Mr. Klein structured or executed more than 500 complex securities  transactions,
in both  public and  private  markets,  involving  every type of debt and equity
security.  Mr. Klein is currently the Managing  Partner of Rubikon  Partners,  a
private equity firm specializing in mid-cap European buy-ins and buy-outs, which
he co-founded together with Dr. Henry Kissinger, the Hon. Thomas McLarty, Leo A.
Daly and J.  Randolph  Dumas.  He has also been a private  investor  in  several
European  technology  companies,  including several in fields which are directly
relevant to the business  strategy of GlobeTel.  Mr. Klein is also  currently on
the Boards of Investitori  Associati (the largest  Italian  private equity fund)
and Holding.com (a Dutch company with high-tech holdings throughout Europe). Mr.
Klein is an alumnus  of Yale  University  (BA in  Mathematics)  and the  Harvard
Business School (MBA in Finance).

Kyle McMahan has served on our Board of Directors  since May 2005.  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.

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.

Mitchell A. Siegel, Director, Senior Vice President, has served in this capacity
since August 2004.  Previously he held the position of Chief Executive Officcer,
Vice President 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.  Leinwand  joined  GlobeTel  as  General  Counsel  in June 2005 and became a
director in August 2005. 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.


                                       72
<PAGE>
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.

(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.


ITEM 10. EXECUTIVE COMPENSATION.

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------

                                                      ANNUAL COMPENSATION
             (a)                 (b)        (c)             (d)              (e)
------------------------------- ------- -------------- --------------- -----------------
 NAME AND PRINCIPAL POSITION     YEAR      SALARY          BONUS         OTHER ANNUAL
                                                                         COMPENSATION
                                            ($)             ($)              ($)
------------------------------- ------- -------------- --------------- -----------------
<S>                               <C>    <C>            <C>                <C>
Timothy M. Huff, CEO/Director     2005   200,000  (a)   300,000   (b)      50,000   (d)
Timothy M. Huff, CEO              2004   200,000  (a)   200,000   (b)      18,750   (d)
Timothy M. Huff, CEO              2003   175,000  (a)         0                 0
Mitchell A. Siegel, Sr.           2005   120,000  (a)   262,500   (b)      55,000   (d)
VP/Director
Mitchell A. Siegel, COO           2004   175,000  (a)   175,000   (b)      18,750   (d)
Mitchell A. Siegel, COO           2003   150,000  (a)         0                 0
Stephen King, Sr VP               2005    47,682  (a)   143,338   (b)      12,500   (d)
Thomas Y. Jimenez, CFO            2005   120,000  (a)   262,500   (b)      55,000   (d)
Thomas Y. Jimenez, CFO            2004   175,000  (a)   175,000   (b)      14,063   (d)
Thomas Y. Jimenez, CFO            2003   150,000  (a)         0                 0
Lawrence E. Lynch, COO            2005   120,000  (a)   218,750   (b)      55,000
Lawrence E. Lynch, Sr. VP         2004    37,500  (a)    37,500   (b)           0
Since August 2004
Joseph Seroussi, CTO              2005   120,000  (a)   218,750   (b)      55,000
Joseph Seroussi, CTO              2004    25,000  (a)    31,250   (b)           0
 Since November 2004
Sir Christopher Meyer,            2005                        0            25,000   (d)
Chairman
Przemyslaw L. Kostro, Former      2005         0              0            18,750   (d)
Chairman
Przemyslaw L. Kostro,             2004         0              0           443,750   (d)
Chairman
Przemyslaw L. Kostro Chairman     2003         0              0                 0
J. Randolph Dumas,     Vice       2005    62,500                            6,250
Chairman
Jonathan Leinwand, Secretary      2005    95,262        142,188            18,750
Laina Green, Director             2005         0              0            19,000   (d)
Jerrold R. Hinton, Director/      2005                        0           100,000   (d)
Former President
Jerrold R. Hinton, Director/      2004                        0            18,750   (d)
Former President
Jerrold R. Hinton, Director/      2003   100,000  (a)         0                 0
Former President
Leigh A. Coleman President        2005    49,220  (a)    72,417   (b)           0
Since to May 2005
Leigh A. Coleman President        2004    70,780  (a)         0   (b)      50,031   (d)
Since June 2004
Vivian Manevich, CAO Through      2005         0  (c)         0                 0
Dec. 2002
Vivian Manevich, CAO Through      2004         0  (c)         0                 0
Dec. 2002
Vivian Manevich, CAO Through      2003         0  (c)         0                 0
Dec. 2002
Michael Molen, Director           2005         0              0            18,520   (d)
Michael Molen, Director           2004         0              0                 0   (d)
Since April 2004
Kyle McMahan, Director            2005         0              0            25,000   (d)
Kyle McMahan, Director            2004         0              0            18,750   (d)
Since May 2004
</TABLE>

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
                                               LONG TERM COMPENSATION
                                            AWARDS                PAYOUTS
             (a)                       (f)             (g)          (h)        (i)
------------------------------- ------------------ ------------- ----------- --------
 NAME AND PRINCIPAL POSITION                        SECURITIES
                                                    UNDERLYING                 ALL
                                RESTRICTED STOCK     OPTIONS/      LTIP       OTHER
                                     AWARDS            SARS       PAYOUTS     COMP.
                                      ($)              (#)          ($)        ($)
------------------------------- ------------------ ------------- ----------- --------
<S>                                <C>                       <C>         <C>       <C>
Timothy M. Huff, CEO/Director      1,988,390  (e)                                  0
Timothy M. Huff, CEO               1,418,394  (e)                                  0
Timothy M. Huff, CEO                       0                  0           0        0
Mitchell A. Siegel, Sr.            1,325,593  (e)             0           0        0
VP/Director
Mitchell A. Siegel, COO              945,596  (e)             0           0        0
Mitchell A. Siegel, COO                    0                  0           0        0
Stephen King, Sr VP                        0  (e)             0           0        0
Thomas Y. Jimenez, CFO               994,195  (e)             0           0        0
Thomas Y. Jimenez, CFO               709,197  (e)             0           0        0
Thomas Y. Jimenez, CFO                     0                  0           0        0
Lawrence E. Lynch, COO               662,797  (e)             0           0        0
Lawrence E. Lynch, Sr. VP                  0                  0           0        0
Since August 2004
Joseph Seroussi, CTO                 662,797  (e)             0           0        0
Joseph Seroussi, CTO                 472,798  (e)             0           0        0
 Since November 2004
Sir Christopher Meyer,                     0                  0           0        0
Chairman
Przemyslaw L. Kostro, Former               0                  0           0        0
Chairman
Przemyslaw L. Kostro,                      0                  0           0        0
Chairman
Przemyslaw L. Kostro Chairman              0                  0           0        0
J. Randolph Dumas,     Vice        4,394,097  (e)             0           0        0
Chairman
Jonathan Leinwand, Secretary               0  (e)             0           0        0
Laina Green, Director                 85,575  (e)             0           0        0
Jerrold R. Hinton, Director/         331,398  (e)             0           0        0
Former President
Jerrold R. Hinton, Director/         472,798  (e)             0           0        0
Former President
Jerrold R. Hinton, Director/               0                  0           0        0
Former President
Leigh A. Coleman President                 0                  0           0        0
Since to May 2005
Leigh A. Coleman President           472,798  (e)             0           0        0
Since June 2004
Vivian Manevich, CAO Through               0                  0           0        0
Dec. 2002
Vivian Manevich, CAO Through               0                  0           0        0
Dec. 2002
Vivian Manevich, CAO Through               0                  0           0        0
Dec. 2002
Michael Molen, Director                    0                  0           0        0
Michael Molen, Director                    0                  0           0        0
Since April 2004
Kyle McMahan, Director                     0                  0           0        0
Kyle McMahan, Director                     0                  0           0        0
Since May 2004
</TABLE>


                                       73
<PAGE>
(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.

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.

(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 24 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.


                                       74
<PAGE>
<TABLE>
<CAPTION>
                                                                   SHARES EXERCISE
           NAME                           POSITION                   (POST-SPLIT)       VALUATION
------------------------------  --------------------------------   ---------------      ----------
<S>                             <C>                                      <C>            <C>
HUFF, TIMOTHY                   Chief Executive Officer/Director           500,000      $  900,000
COLEMAN, LEIGH A                Former President                           211,734      $  381,121
JIMENEZ, THOMAS Y               Chief Financial Officer                    280,216      $  504,389
SIEGEL, MITCHELL A              Senior VP/Director                         369,022      $  664,240
LYNCH, LAWRENCE E               Chief Operating Officer                     12,897      $   29,020
SEROUSSI, JOSEPH                Chief Technical Officer                    172,065      $  309,717
HINTON, JERROLD                 Former President/Former Director           100,000      $  180,000
MOLEN, MICHAEL                  Former Director                              8,715      $   15,687
                                                                   ---------------      ----------
TOTAL - OFFICERS & DIRECTORS                                             1,654,649       2,984,174
                                                                   ===============      ==========
</TABLE>

COMPENSATION OF DIRECTORS

We maintain a policy of compensating our directors using cash and stock options.
Directors  are paid  $25,000 per (annum or  quarter).  Upon their  election as a
member of the board of directors, each director received (number) stock options;
except for our employee  directors who are not compensated for their role on the
Board.  These  options  granted to our  directors  vest as  follows:  options to
purchase  (number or ratio) of the shares vest as of (date or date of grant,  if
applicable),  (ratio)  vests as of the (first  anniversary,  usually) of date of
grant, and (ratio) vests as of the (second anniversary) of the date of grant. We
reimburse  our  directors  for  all  out-of-pocket   expenses  incurred  in  the
performance of their duties as directors. We currently pay fees to our directors
for attendance at meeting.


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

COMMON STOCK

At the  date of  this  report,  we had  102,808,081  common  shares  issued  and
outstanding.  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.

<TABLE>
<CAPTION>
                                                                               AMOUNT AND NATURE OF      PERCENTAGE
TITLE OF CLASS    NAME AND ADDRESS OF BENEIFICAL OWNER                         BENEIFICAL OWNERWHIP      OF CLASS (1)
--------------    -----------------------------------------------------        -----------------------   ------------
<S>               <C>                                                          <C>                          <C>
Common Stock      Sir Christopher Meyer, Chairman                                 17,908        shares      0.02%
                  9050 Pines Blvd. Suite 110 Pembroke Pines, FL 33024
Common Stock      Przemyslaw L. Kostro, Former Chairman                          606,667        shares      0.59%
                  9050 Pines Blvd. Suite 110 Pembroke Pines, FL 33024
Common Stock      J.Randolph Dumas, Vice Chairman                                185,185        shares      0.18%
                  9050 Pines Blvd. Suite 110 Pembroke Pines, FL 33024
Common Stock      Timothy M. Huff, CEO                                         2,440,920        shares      2.36%
                  9050 Pines Blvd. Suite 110 Pembroke Pines, FL 33024
Common Stock      Jerrold R. Hinton, Former Director / President               1,677,367  (2)   shares      1.63%
                  9050 Pines Blvd. Suite 110 Pembroke Pines, FL 33024
Common Stock      Leigh A. Coleman, Former President                             345,935        shares      0.34%
                  9050 Pines Blvd. Suite 110 Pembroke Pines, FL 33024
Common Stock      Mitchell A. Siegel, Board, Sr. VP                            1,807,882  (3)   shares      1.76%
                  9050 Pines Blvd. Suite 110 Pembroke Pines, FL 33024
Common Stock      Thomas Y. Jimenez, CFO                                         934,369  (4)   shares      0.91%
                  9050 Pines Blvd. Suite 110 Pembroke Pines, FL 33024
Common Stock      Lawrence E. Lynch, COO since August 2004                       532,502        shares      0.52%
                  9050 Pines Blvd. Suite 110 Pembroke Pines, FL 33024
Common Stock      Joseph Seroussi, CTO                                           325,747        shares      0.32%
                  9050 Pines Blvd. Suite 110 Pembroke Pines, FL 33024
Common Stock      Stephen King, Sr. VP                                             9,822        shares      0.01%
                  9050 Pines Blvd. Suite 110 Pembroke Pines, FL 33024
Common Stock      Jonathan Leinwand, Director & General Counsel                   19,643        shares      0.02%
                  9050 Pines Blvd. Suite 110 Pembroke Pines, FL 33024
Common Stock      Michael Molen, Former Director                                   8,715        shares      0.01%
                  9050 Pines Blvd. Suite 110 Pembroke Pines, FL 33024        ------------------------------------
                  Total of all Officers and Directors as a Group               8,912,662                    8.67%
Common Stock      unconsolidated foreign 0ubsidary - CGI                         613,333        shares      0.60%
                  9050 Pines Blvd. Suite 110 Pembroke Pines, FL 33024
Common Stock      Joe Monterosso, Principal of Related Party, CSI                105,398        shares      0.10%
                                                                             ------------------------------------
                  9050 Pines Blvd. Suite 110 Pembroke Pines, FL 33024
                  Subtotal - Affiliates                                        9,631,393                    9.37%
                                                                             ------------------------------------
                  Subtotal - Non-Affiliates                                   93,176,688                   90.63%
                                                                             ------------------------------------
                  TOTAL OUTSTANDING                                          102,808,081                  100.00%
</TABLE>

(1) Based on 102,808,081 shares issued and outstanding on March 3, 2006.

(2) The shares  beneficially  owned by Jerrold R. Hinton  include  50,000 shares
owned of record by Higher Ground, a corporation  controlled by Mr. Hinton, which
may be deemed beneficially owned by Mr. Hinton.

(3) The shares  beneficially  owned by Mitchell A. Siegel include 551,964 shares
owned of record by Mr. Siegel's spouse,  Mrs. Vivian  Manevich-Siegel,  a former
company officer, which are deemed beneficially owned by Mr. Siegel.

(4) The shares beneficially owned by Thomas Y. Jimenez, include 667 shares owned
of record by Mr. Jimenez's spouse.


                                       75
<PAGE>
SERIES D PREFERRED STOCK

At the date of this  report,  we had 1,000  shares of Series D  Preferred  Stock
issued and  outstanding.  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  Series D
Preferred Stock shares

<TABLE>
<CAPTION>
                                                                        Amount and Nature of        Percentage
Title of Class     Name and Address of Beneficial Owner                 Beneficial Ownership         of Class
--------------     ----------------------------------------------       --------------------         --------
<S>                                                                         <C>                       <C>
Series D
Preferred Stock    Mitchell A. Siegel, COO                                  1,000  shares             100.00%
                   9050 Pines Blvd. Suite 110
                   Pembroke Pines, FL 33024

                   Total of all Officers and Directors as a Group           1,000                     100.00%
</TABLE>


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

See  Item 7,  Notes  24 and 25  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.

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


                                     PART IV
ITEM 14. EXHIBITS


(A) EXHIBITS

EXHIBIT NO.    DESCRIPTION

3.1            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 required by Rule
               13a-14(a)/15d-14(a)

31.2           Certification of Chief Financial Officer required by Rule
               13a-14(a)/15d-14(a)

32.1           Certification of Chief Executive Officer Pursuant to 18 U.S.C.
               Section 1350, As Adopted Pursuant to Section 906 of the
               Sarbanes-Oxley Act of 2002.

32.2           Certification of Chief Financial Officer Pursuant to 18 U.S.C.
               Section 1350, As Adopted Pursuant to Section 906 of the
               Sarbanes-Oxley Act of 2002.

99.1           Safe Harbor Compliance Statement for Forward-Looking Statements
               filed herewith


                                       76
<PAGE>
SIGNATURES

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

GLOBETEL COMMUNICATIONS CORP.


                  /s/ Timothy Huff
                  Timothy M. Huff, CEO
                  Miami, Florida
                  Dated: March 31, 2006

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.
                          GLOBETEL COMMUNICATIONS CORP.
                                   REGISTRANT


                  /s/ Timothy Huff
                  Timothy Huff, Chief Executive Officer and Director
                  Dated: March 31, 2006


                  /s/ J. Randolph Dumas
                  J. Randolph Dumas, Chairman
                  Dated: March 31, 2006


                  /s/ Michael P. Castellano
                  Michael P. Castellano,
                    Chairman of the Audit Committee and Director
                  Dated: March 31, 2006


                  /s/  Dorian Klein
                  Dorian Klein, Director
                  Dated: March 31, 2006


                  /s/ Kyle McMahan
                  Kyle McMahan, Director
                  Dated: March 31, 2006


                  /s/ Jonathan Leinwand
                  Jonathan Leinwand, Director, Corporate Counsel
                  Dated: March 31, 2006


                  /s/ Mitchell A. Siegel
                  Mitchell A. Siegel, Sr. VP and Director
                  Dated: March 31, 2006


                  /s/ Thomas Y. Jimenez
                  Thomas Y. Jimenez, Chief Financial Officer
                  Dated: March 31, 2006

                                       77