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, 2008




OR





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





For the
transition period from _________ to _________





Commission
File Number: 0-23532





SANSWIRECORP.


(formerly
GlobeTel Communications Corp.)





(Exact
name of Registrant as specified in its charter)





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




101 NE 3rdAve, Suite 1500, Fort
Lauderdale, Florida 33301


(Address
of Principal Executive Offices) (Zip Code)





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





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


Title
      of each class
            Name
      of exchange on which registered





Securities
registered pursuant to Section 12 (g) of the Exchange Act: Common Stock Par
Value $.00001 per share




Indicate
by check mark whether the registrant is a well-known seasoned issuer as defined
in Rule 405 of the Securities Act.  Yes £     No
x





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.  Yes £     No
x





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 £ No x





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





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer.  See definition of
“accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange
Act.   (Check one):





Large accelerated filer ̈
                Accelerated filer ̈
                Non-accelerated filer ̈Smaller Reporting Companyx





Indicate
by check mark whether the registrant is a shell company (as defined by Rule
12b-2 of the Exchange Act) Yes £     No
x





State
issuer's revenues for its most recent fiscal year ended December 31, 2008:
$0.





As of
March 31, 2009, there were 185,887,861 shares of the issuer's common stock
issued and outstanding. Affiliates of the issuer own 2,876,752 shares of the
issuer's issued and outstanding common stock and the remaining 183,011,109
shares are held by non-affiliates. The aggregate market value of the shares held
by non-affiliates at March 31, 2009 was $9,333,567.







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.





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








TABLE
OF CONTENTS





PART
      IItem
      1. Description of Business
              5Item
      2. Description of Property
              10Item
      3. Legal Proceedings
              10Item
      4. Submission of Matters to a Vote of Security Holders
              13PART
      IIItem
      5. Market for Common Equity and Related Stockholder
Matters
              14Item
      6. Selected Consolidated Financial Data
              15Item
      7. Management's Discussion and Analysis or Plan of
    Operation
              16Item
      7a. Quantitative and Qualitative Disclosures about Market
    Risk
              22Item
      8. Financial Statements
              23Item
      9. Changes In and Disagreements With Accountants on Accounting and
      Financial Disclosure
              54Item
      9a. Controls and Procedures
              54Item
      9b. Other Information
              55PART
      IIIItem
      10. Directors and Executive Officers, Promoters and Control
      Persons
              56Item
      11. Executive Compensation
              57Item
      12. Security Ownership of Certain Beneficial Owners and Management and
      Related Stockholder Matters
              58Item
      13. Certain Relationships and Related Transactions
              58Item
      14. Principal Accountant Fees and Services
              59Item
      15. Exhibits
              59


3


PART
I





Forward-Looking
Statements and Risk Factors





Certain
information included in this Form 10-K and other materials filed or to be filed
by Sanswire Corp. ("Sanswire," "GlobeTel," the “Company”, "we", "us" or "our")
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.





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.





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





The
following risk factors may affect our operating results and the environment
within which we conduct our business. If our projections and estimates regarding
these factors differ materially from what actually occurs, our actual results
could vary significantly from any results expressed or implied by
forward-looking statements. These risk factors include, but are not limited to,
changes in general economic, demographic, geopolitical or public safety
conditions which affect consumer behavior and spending, including the armed
conflict in Iraq or other potential countries; various factors which increase
the cost to develop airships, including factors under the influence and control
of government agencies and others; fluctuations in the availability and/or cost
of helium, carbon fiber or other resources necessary to successfully assemble
our airships; our Company's ability to raise prices sufficiently to offset cost
increases, including increased costs for resources; 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 governments; depth of management and technical
expertise and source of intellectual and technological resources; adverse
publicity about us and our airships; relations between our Company and its
employees and partners; legal claims and litigation against the Company;
including the recently commenced SEC lawsuit; the availability, amount, type,
and cost of capital for the Company and the deployment of such capital,
including the amounts of planned capital expenditures; changes in, or any
failure to comply with, governmental regulations; the amount of, and any changes
to, tax rates and the success of various initiatives to minimize taxes; and
other risks and uncertainties referenced in this Annual Report on Form 10-K.
This statement, and any other statements that are not historical facts, are
forward-looking statements.





This
annual report also contains certain estimates and plans related to the airship
industry. 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 market for lighter than
air unmanned aerial vehicles. Our growth will be dependent upon our ability to
compete with larger, well-established companies. If our assumptions are wrong
about any events, trends and activities, then our estimates for the future
growth of Sanswire 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.


4


ITEM
1. DESCRIPTION OF BUSINESS





General





Sanswire
Corp. ("Sanswire," "Globetel", “we”, “us”, “our”, or the “Company”) is focused
on the design, construction and marketing of various aerial vehicles most of
which would be capable of carrying payloads that provide persistent surveillance
and security solutions at various altitudes. The airships and auxiliary products
are intended for end users that include military, defense and government-related
entities.





From 2002
to 2007, the Company was involved in the following business sectors: stored
value card services; wholesale telecommunications services; voice over IP;
wireless broadband; and high altitude airships. These businesses were run
through various subsidiaries. The Company discontinued operations in all but the
high altitude airship sector.





In 2007,
we began focusing exclusively on opportunities through our wholly-owned
subsidiary at the time, Sanswire Networks. The opportunities associated with
Sanswire Networks were related to the Lighter Than Air (LTA) Unmanned Aerial
Vehicle (UAV) market, and we, through the subsidiary, sought to build and run a
UAV business that includes low-, mid- and high-altitude, lighter-than-air
vehicles intended to provide customers advanced seamless wireless broadband
capabilities and surveillance sensor suites.





On
September 22, 2008, we effected a name change to Sanswire Corp. in recognition
of the entity that contained our sole business focus (See “Recent
Developments”). Thus, moving forward, the Company is Sanswire Corp., whose
primary business is the design, construction and marketing of a variety of
aerial vehicles through a joint venture with TAO Technologies, Stuttgart,
Germany, named Sanswire-TAO Corp.





The High
Altitude class of prospective airships are generally referred to as HAAs
(High Altitude Airships) but have also been called HAPs and HALEs (High Altitude
Platforms, High Altitude Long Endurance). They have been designed to be able to
keep a station in one location in the Stratosphere, at approximately 65,000 ft
for durations of 30 days or more.





Reverse
Stock Split





Sanswire
is authorized to issue up to 250,000,000 shares of Common Stock, par value
$0.00001 per share, (subsequent to a 15-for-1 reverse stock split on May 23,
2005 and subsequent to an increase in the authorized shares from 150,000,000 to
250,000,000 at the shareholder meeting on June 21, 2006) and 10,000,000 shares
of Preferred Stock, par value $0.001. The post split share calculation will be
used throughout this report, unless noted. 760,000 shares of Preferred Stock has
been allocated into different series of issuance and the remaining 9,240,000
shares 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.





Recent
Developments





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


5





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





On May 1,
2008 the SEC filed a lawsuit (the “complaint”) against Sanswire and three of the
Company's former officers (Securities and Exchange Commission v. GlobeTel
Communications Corp., Timothy J. Huff, Thomas Y. Jimenez and Lawrence E. Lynch,
Case No. 08-CV-60647 (S.D. Fla., filed May 1, 2008).  The complaint
filed represents decisions and actions taken by Sanswire's management team
during the Company's operations covering 2004-2006.  Specifically the
complaint concerns former CEO Timothy Huff, former COO and CFO Larry Lynch, and
former CFO Thomas Jimenez.  The complaint reiterates that former
officer Joseph Monterosso and former employee Louis Vargas conspired to and
carried out a scheme to fraudulently cause the Company to report 119 million
dollars in nonexistent revenue. The Company no longer has any relationship with
those individuals.  As a result of the alleged schemes and actions of
the previous management mentioned in the complaint, the Company is diligently
working to come into compliance with all relevant regulations.  The
Company has formally exited all businesses associated with the alleged schemes
and continues to operate under new management with the goal of completing the
restructuring of the Company and focusing all its efforts on new opportunities
in the aerospace sector.





On
September 22, 2008 we filed a Certificate of Merger with the Secretary of State
of the State of Delaware pursuant to which our wholly owned subsidiary, Sanswire
Corp., a Delaware corporation, was merged into us. As a result of the filing of
the Certificate of Merger, our corporate name was changed from GlobeTel
Communications Corp. to Sanswire Corp.




Background





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





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 Sanswire common
stock, ADGI became a wholly-owned subsidiary of Sanswire and Sanswire began
conducting the business formerly conducted by ADGI.





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. We have since closed Centerline and its
subsidiaries.


6




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




In 2008
we incorporated Sanswire Corp., a Florida corporation and wholly-owned
subsidiary, to deal directly with airship opportunities based upon our agreement
with TAO Technologies, GmbH. We also incorporated Sanswire-TAO Corp., a Florida
corporation that is a 50/50 joint venture with TAO Technologies. The agreements
with TAO are discussed below.




On
September 22, 2008 we filed a Certificate of Merger with the Secretary of State
of the State of Delaware pursuant to which our wholly owned subsidiary, Sanswire
Corp., a Delaware corporation, was merged into us. As a result of the filing of
the Certificate of Merger, our corporate name was changed from GlobeTel
Communications Corp. to Sanswire Corp.




Business
of Sanswire




Sanswire
Corp. has sharply refined its operating model ─ focusing exclusively on
opportunities in Lighter Than Air (LTA) Unmanned Aerial Vehicles (UAV). We seek
to build and run a UAV business that includes low-, mid- and high-altitude,
lighter-than-air vehicles; adding value to their security, surveillance and
broadcasting abilities through the integration of wireless technologies with a
wide array of customer payloads. Our long-term objective is to provide
commercial and government customers advanced seamless wireless broadband
capabilities and surveillance sensor suites utilizing a state of the art High
Altitude Airship technology.  Building upon this high altitude technology,
Our near term goal is to penetrate the military/government use market for low to
mid altitude unmanned airships




Our main
products are airships, which provide a platform to transmit wireless
capabilities from air to ground.




The High
Altitude class of prospective airships are generally referred to as HAAs
(High Altitude Airships) but have also been called HAPs and HALEs (High Altitude
Platforms, High Altitude Long Endurance). They have been designed to be able to
keep a station in one location in the Stratosphere, at approximately 65,000 ft
for durations of 30 days or more.  65,000 ft is the sweet spot in
the stratosphere for optimal wind conditions to keep station using the least
amount of power.




STRATELLITETMThe brand name
for our HAA offering is the StratelliteTM, so named because they offer the
functionality of a satellite, but in the stratosphere. This class of airship
will consist of several models to suit various purposes. StratellitesTM were
conceived to help solve infrastructure issues that plague many parts of the
world, including the so called "last mile" (building expensive ground based
infrastructure for very low density areas) issues.  The StratelliteTM can
bring a full range of telecommunications or broadcasting capabilities to any
area of the world, accessible to people with customer premise equipment that is
inexpensive and available. We are not yet producing the
Stratellite.




The
StratelliteTM is a high altitude long endurance airship intended to populate
“near space” with telecommunications capability.  A presence in near
space with high tech sensors and communications suites offers enormous potential
for both commercial and government applications.  Whether hovering at
65,000 feet or flying a variety of mission profiles, the Stratellite offers many
of the features of satellites with cost savings, refurbishment ability, and
opportunity for regular system upgrades.





There is
a great need for information-transmission in the future performed by High
Altitude Platforms in various fields;


7


·
            mobile
      broadband communications


·
            emergencies,
      use in disaster areas


·
            marine
      radio service


·
            new
      traffic engineering systems


·
            weather
      observation


·
            water
      surveillance (pollution)


·
            ozone
      and smog monitoring


·
            radiation
      monitoring (UV and radioactive)


·
            astronomic
      and terrestrial observation


·
            documentation
      of conditions in the upper
atmosphere


·
            border
      control, coastal surveillance


·
            private
      communication services e.g. cellular
phones


·
            transmission
      of radio- and television programmers
etc.





SANSWIRE-TAO





Sanswire
first entered into an agreement with TAO Technologies GmbH, Stuttgart, Germany,
in 2005.  At that time, TAO provided engineering support to the
efforts of former subsidiary Sanswire Networks, LLC then working out of
facilities in California. In September 2007, the companies reached an agreement
in principle to share sales and marketing rights of various aerial vehicles
developed and currently owned by TAO. Additionally, upon closing of definitive
agreements, TAO will grant to Sanswire-TAO the respective patents and
intellectual property rights covering the products, including the AirChain
segmented airship.





In
November 2007, the Company entered into a Licensing and Technical Cooperation
Agreement with TAO. TAO granted to Sanswire an exclusive license for the
territories of the US, Canada, Mexico and Chile for the marketing and
distribution of airships based upon the technologies patented and developed by
TAO. TAO will also provide testing and engineering support for the development
of airships to meet the criteria required by Sanswire customers. Sanswire was
obligated to provide TAO with engineering orders of at least $1,000,000 per year
and certain cash and stock payments on a quarterly basis.





On June
3, 2008 Sanswire and TAO restructured
the November 2007 agreement and entered
into a new agreement to form a 50/50 US based joint venture to place, among
other things, the rights to the TAO intellectual property in US, Canada, and
Mexico into the US based JV company to be called Sanswire-TAO.  This
integration of Sanswire and Stuttgart, Germany-based TAO Technologies Gmbh took
place to create various strategic advantages for both companies. Each group
entered the relationship with synergistic, yet very distinct core competencies.
Sanswire’s business development, its inroads into the U.S. Government review
process as well as inroads into overseas markets and other marketing resources
complement TAO’s vast airship product research and development
ability.





On June
19, 2008, we announced that we had agreed to form and commence operations of
Sanswire-TAO Corp., a Florida corporation equally owned by the Company and TAO,
for the customized production, marketing and sales of unmanned aerial vehicles
for the markets of the United States, Canada and Mexico.





The
Sanswire-TAO research and development efforts are centered in Stuttgart, taking
advantage of the relationship between TAO and the University of Stuttgart. This
relationship provides cost-effective access to aerospace testing facilities
including wind tunnels, environmental test chambers, structural testing devices,
computer aided design and a legion of aerospace and physics professionals along
with their more than 10 years of solar powered airship experience. The
Sanswire-TAO joint venture provides the following:





(1)
            Multiple
      Airship Platforms – Ranging from short range low altitude platforms to
      Stratospheric solutions.


(2)
            Access
      to Resources – Through contractual relationships with world-renowned
      universities, including their hometown University of
      Stuttgart.


(3)
            Research
      and Development – More than a decade of knowledge and experience resulting
      from significant data gathered from vital airship
  testing.


8


(4)
            Proprietary
      Systems – Custom developed systems from the design and modeling of
      airships to specialized flight control
systems.


(5)
            Intellectual
      Property – Patented designs and concepts providing worldwide
      protection.


(6)
            Constructed
      Airships – Several platforms built for
  demonstrations


(7)
            Testing
      Facilities – Including aerospace laboratories, assembly and storage
      hangars, wind tunnels, certified launch and flight facilities, and
      certified manufacturing and production
  facilities.





Competitive
Business Conditions





We are
aware of other companies that are also developing high altitude platforms
similar in nature to our Stratellite project. Our competitors, though, may have
more resources available to develop their respective products. 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 other
airships or that the costs to produce such revenues will not exceed the revenues
or that the project will otherwise be profitable. There can be no assurance that
we will be able to successfully achieve the results we anticipate with this
project.





Sources
and Availability of Hardware and Software





Equipment
for the Stratellite, SAS-51 and the prototypes thereof are custom made for those
products and are dependent upon either single or limited number of suppliers for
certain goods. Failure of a supplier could cause significant delays in delivery
of the airships if another supplier cannot be promptly found.





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. Similarly, we have current
and contemplated arrangements for supply required component parts, both
internally developed, as well as, outsourced from specialty contractors to
provide component parts to continue with this project in the near
term.





Dependence
on a Few Customers





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





Trademarks





We have
filed for registration of the names "Stratellite" and "Sanswire" under the
Madrid Protocol (that includes the United States) and in many non-Madrid
Protocol countries.





We have
additionally entered into an agreement with TAO Technologies GmbH, with whom
Sanswire has collaborated with since 2005. The current agreement provides
exclusive licensing and existing and future patent rights for TAO’s airship
technologies and allows Sanswire to register the TAO patents in the United
States.  As soon as the design and engineering for the Stratellite are
finalized, we intend to file for patents covering unique design and intellectual
property.





Regulatory
Matters





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


9





During
2007 and 2008, Sanswire and its subsidiaries incurred payroll tax liability
during the normal course of business at each payroll cycle. The Company
submitted certain withholding tax payments during the first quarter through a
payroll processor, ADP. Subsequent thereto, the Company no longer processed its
payroll through ADP. During this time, the Company did not file the appropriate
tax forms or deposit the appropriate withholding amounts. The Company has
recognized this issue and contacted the IRS accordingly to bring its filings
up-to-date and pay any taxes due. The Company may be subject to penalties and
interest from the IRS.





Number
of Total Employees and Number of Full-Time Employees





As of
March 31, 2009 we have 3 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 for our general
operations and any technical personnel required for the aerospace projects will
primarily be hired overseas to work with the existing TAO
personnel.





ITEM
2. PROPERTIES





Sanswire’s
corporate offices are now located at 101 NE 3 rd Ave.,
Suite 1500, Fort Lauderdale, FL 33301. Base rent is $575 per month plus the cost
of services used by Sanswire. The lease is for a period of 6 months and
terminates on September 30, 2009.   We believe our facilities are
adequate for our current and near-term needs.




GlobeTel
previously leased office facilities at 9050 Pines Blvd., Suite 110, Pembroke
Pines, Florida 33024, as of April 1, 2004, and  vacated the premises
in March 2006, having turned over the space as part of the sale of the Stored
Value assets. However, there was unpaid rent due on both the first and second
floor suites. In August 2007, the landlord received a judgment in the amount of
$206,730.





Until
September 2007, GlobeTel 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.





As of
October 2007, the Company no longer occupies a hangar at Palmdale Regional
Airport, the monthly cost of this space was $20,847. This facility was adjacent
to the United States Air Force’s Plant 42 and Edwards Air Force Base. Sanswire
constructed and tested Stratellite and Sky Sat prototypes at the facility. The
hangar also included administrative office space. Sanswire is indebted to Los
Angeles World Airports, the lessor of the hangar, in the amount of
$161,761.





ITEM
3. LEGAL PROCEEDINGS





Securities and Exchange
Commission





On
September 28, 2006, the Company received a formal order of investigation from
the SEC. The formal order only named the Company and was not specific to any
particular allegations. Through the use of subpoenas, the SEC has requested
documentation from certain officers and directors of the Company. In subsequent
subpoenas, the SEC has asked for additional documents and
information.





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


10


On May 2,
2008, the Securities and Exchange Commission (“SEC”) filed a lawsuit in the
United States District Court for the Southern District of Florida against
Sanswire Corp. (the “Company”) and three former officers of the Company, Timothy
J. Huff, Thomas Y. Jimenez and Lawrence E. Lynch. The SEC alleges, among other
things, that the Company recorded $119 million in revenue on the basis of
fraudulent invoices created by Joseph Monterosso and Luis Vargas, two
individuals formerly employed by the Company who were in charge of its wholesale
telecommunications business.





The SEC
alleges that the Company violated Sections 5(a), 5(c), and 17(a) of the
Securities Act of 1933, as amended, Sections 10(b), 13(a), 13(b)(2)(A) and
13(b)(2)(B) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), and Rules 10b-5, 12b-20, 13a-1, 13a-11 and 13a-13 under the Exchange Act.
The SEC seeks as relief a permanent injunction, civil penalties, and
disgorgement with prejudgment interest. The Commission subsequently consolidated
this action with another pending action involving former officers of the
Company. The Commission has also moved to amend its complaint against the
Company to include additional allegations of wrongdoing beginning in 2002, which
motion to amend is still pending with the Court.  The parties are
currently engaged in discovery.  The Company has been vigorously
defending itself in this action.





Joseph
Monterosso





In
October 2007 the Company filed a lawsuit in the Circuit Court for Broward
County, Florida against Joseph J. Monterosso alleging Libel, Slander and
Defamation, Tortuous Interference, Violations of FS § 836.05 (Threats
Extortion)  and violations of FS §517 (Securities Fraud). Mr.
Monterosso has not yet been served with the complaint pending additional
information arising from the SEC lawsuit.





Wachovia v.
GlobeTel





In
connection with the operations of Globetel Wireless Europe GmbH and the
acquisition of Altvater GmbH, the Company guaranteed a letter of credit in the
amount of $600,000. Upon Globetel Wireless Europe GmbH ceasing operations, the
letter of credit was drawn upon. The letter of credit was not collateralized. In
September 2007, Wachovia filed a lawsuit in Broward County in an attempt to
recover the amount through arbitration with the American Arbitration
Association. On June 2, 2008, the American Arbitration Association awarded
Wachovia $762,902.





Richard Stevens v.
GlobeTel





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





In
February 2008, the Company and the Plaintiff reached a settlement in principle
that has been filed with the Court for approval. Under the terms of the proposed
settlement agreement in the class action, the Company’s D&O insurance
carrier will make a cash payment to the class of $2,300,000, less up to $100,000
for potential counsel fees and expenses. All claims in the class action will be
dismissed with prejudice. The US District Court for the Southern District of
Florida has approved the settlements reached in its pending securities class
action and a shareholder derivative action on February 4, 2008.


11


Derivative
Action





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





Mitchell Siegel v.
GlobeTel





On
February 2, 2007, the Company was sued in the Circuit Court for Broward County,
Florida entitled Mitchell Siegel v. GlobeTel Communications Corp. , Case no.
0702456 (“the Siegel Lawsuit”). In this action, Siegel sued the Company for
breach of contract in regards to a Key Executive Employment
Agreement.  On February 15, 2008, both parties entered into a
settlement agreement whereas Mr. Siegel would receive $175,000 worth of stock,
payable over 12 months, and 50% of the gross proceeds, up to a total amount of
$300,000, received from an October 2006 agreement.  During 2008 the
Company paid $131,250 in the Company’s common stock associated with the
settlement agreement.  During 2009 the Company paid an additional
$29,167 in the Company’s common stock.





Former
Consultants





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. Sanswire was entered into the
action as ADGI was the predecessor of the Company. The suit also requests an
accounting for the sales generated by the consultants and attorneys fees and
costs for the action.





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





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





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





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





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


12





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





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





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





Trimax
Wireless





On July
3, 2007 Sanswire filed suit against its former employee Ulrich Altvater and his
company Trimax Wireless seeking the return of certain equipment held at the
former GlobeTel Wireless offices and for the return of $175,000 lent to Altvater
by the Company. The replevin action against Trimax was dismissed on the basis of
venue and the Company intends to refile the suit with regard to Trimax in
Collier County, Florida.




On July
12, 2007, the Company terminated its agreement with Mr. Altvater and his
company, Trimax Wireless, Inc.




In August
2007, Altvater and Trimax filed suit against Sanswire alleging, defamation,
conversion, breach of contract and seeking injunctive relief. Sanswire
successfully moved to have the two cases consolidated and has filed a Motion to
Dismiss this suit.  The Company intends to vigorously defend this
suit, but no assurance can be given about the outcome of the
litigation.




American
Express





American
Express Travel Related Services Company, Inc. has filed a lawsuit against the
Company and Sanswire Networks LLC (CASE NO: CACE 08-013239, Broward County
Florida), seeking to recover a total of $394,919 for unpaid charges on the
Companies’ corporate purchasing account. On October 3, 2008, American Express
received a final judgment for $404,113.





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





There
were no matters brought to a vote of security holders in 2008 and
2007.


13


PART
II




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





(a)
MARKET PRICE





In
October 2006, our stock was delisted from the American Stock Exchange and began
trading on the Pink Sheets under the symbol “GTEM”. From October 2006 to October
2008 our shares of common stock have been quoted on the Pink Sheets quotation
system under the symbol “GTEM." Effective October 8, 2008 our shares of common
stock have been quoted on the Pink Sheets quotation system under the symbol
“SNSR."





The
following information sets forth the high and low bid price of our common stock
during fiscal 2008, and 2007 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.




HIGH
                  
                  
                  LOWCALENDAR
      2007Quarter
      Ended March 31
                  
                  $
                  0.52
                  
                  
                  $
                  0.24Quarter
      Ended June 30
                  
                  $
                  0.32
                  
                  
                  $
                  0.18Quarter
      Ended September 30
                  
                  $
                  0.26
                  
                  
                  $
                  0.08Quarter
      Ended December 31
                  
                  $
                  0.16
                  
                  
                  $
                  0.04CALENDAR
      2008Quarter
      Ended March 31
                  
                  $
                  0.14
                  
                  
                  $
                  0.07Quarter
      Ended June 30
                  
                  $
                  0.09
                  
                  
                  $
                  0.03Quarter
      Ended September 30
                  
                  $
                  0.10
                  
                  
                  $
                  0.04Quarter
      Ended December 31
                  
                  $
                  0.08
                  
                  
                  $
                  0.03





(b)
HOLDERS





As of the
date of this report, there were approximately 21,000 registered holders of our
common stock.





(c)
DIVIDENDS





The
Company has never paid a dividend and does not anticipate that any dividends
will be paid in the foreseeable future.





(d)
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS





The
following table sets forth the information indicated with respect to our
compensation plans as of December 31, 2008, under which our common stock is
authorized for issuance.


14




Number of Securities to be
                        issued
                        upon exercise of outstanding
                        options, warrants and rights
                        (a)
                      
                      
                      Weighted average
                        exercise price of
                        outstanding options,
                        warrants and rights
                        (b)
                      
                      
                      Number of securities
                        remaining available for
                        future issuance under
                        equity compensation plans
                        (excluding securities
                        reflected in column (a))
                        (c)Equity
      compensation plans approved by security holders
                      
                      
                      15,982,752
                      
                      
                      $
                      0.35
                      
                      
                      
                      —Equity
      compensation plans not approved by security holders
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —Total
                      
                      
                      15,982,752
                      
                      
                      $
                      0.35
                      
                      
                      
                      —





ITEM
6. SELECTED CONSOLIDATED FINANCIAL DATA




The
following tables set forth our selected historical financial data for the
periods indicated. The selected statement of operations data for the years ended
December 31, 2008 and 2007, and the selected balance sheet data as of
December 31, 2008 and 2007, have been derived from our audited financial
statements and related notes thereto included elsewhere in this annual
report.




The
information presented below should be read in conjunction with “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” and
the financial statements and the notes thereto included elsewhere in this annual
report.




Year
      Ended December 31,2008
                        
                        
                        2007Statement
      of Operations Data:Revenue
                        
                        $
                        —
                        
                        
                        $
                        53,754Cost
      of revenue
                        
                        
                        —
                        
                        
                        
                        15,529Gross
      margin (loss)
                        
                        
                        —
                        
                        
                        
                        38,225Operating
      expensesGeneral
      and administrative expenses
                        
                        
                        476,827
                        
                        
                        
                        1,567,968Consulting
      fees
                        
                        
                        1,415,235
                        
                        
                        
                        1,635,303Payroll
      and related taxes
                        
                        
                        887,283
                        
                        
                        
                        3,611,596Bad
      debts
                        
                        
                        —
                        
                        
                        
                        —Research
      and development expenses
                        
                        
                        —
                        
                        
                        
                        (14,856
                        )Officers’
      and directors’ compensation
                        
                        
                        435,000
                        
                        
                        
                        696,790Loss
      from operations
                        
                        
                        (3,214,345
                        )
                        
                        
                        (7,458,576
                        )Loss/Gain
      on extinguishment of debt
                        
                        
                        (1,096,650
                        )
                        
                        
                        254,200Loss
      on disposition of equipment
                        
                        
                        —
                        
                        
                        
                        —Loss
      on impairment of equipment
                        
                        
                        —
                        
                        
                        
                        —Interest
      expense, net
                        
                        
                        (1,127,420
                        )
                        
                        
                        (2,482,296
                        )Loss
      from continuing operations
                        
                        
                        (5,438,415
                        )
                        
                        
                        (9,686,672
                        )Loss/Gain
      from discontinued operations
                        
                        
                        (197
                        )
                        
                        
                        (1,918,806
                        )Net
      loss
                        
                        $
                        (5,438,612
                        )
                        
                        $
                        (11,605,478
                        )Net
      loss per shareBasic
      and diluted
                        
                        $
                        (0.04
                        )
                        
                        $
                        (0.10
                        )


15




As
      of December 31,2008
                      
                      
                      2007Balance
      Sheet Data:Cash
      and cash equivalents
                      
                      $
                      4,809
                      
                      
                      $
                      32,278Investment
      in joint venture
                      
                      
                      3,229,000
                      
                      
                      
                      —Deposits
                      
                      
                      —
                      
                      
                      
                      391,000Total
      assets
                      
                      
                      3,240,215
                      
                      
                      
                      441,956Total
      liabilities
                      
                      
                      17,944,125
                      
                      
                      
                      13,666,678Stockholders’
      deficit
                      
                      
                      (14,703,910
                      )
                      
                      
                      (13,224,722
                      )




ITEM
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.





GENERAL





Twelve
months ended December 31, 2008 ("Fiscal 2008" or "2008" or "the current year")
compared to twelve months ended December 31, 2007 ("Fiscal 2007" or "2007" or
"the prior year").





RESULTS
OF OPERATIONS





REVENUES.
During fiscal 2008, we had no gross sales, representing a decrease of 100% over
the prior year when our gross sales were $53,754. Our revenues decreased
primarily due to the Company focusing on the airship development and continuing
to prepare a commercially feasible product for our future potential
customers.





COST OF
SALES. During fiscal 2008, we had no cost of sales representing a decrease of
100% from $15,529 for fiscal 2007.





GROSS
MARGIN. Our gross margin was $0 for fiscal 2008, compared to our gross margin of
$38,225 or 71.1% for fiscal 2007, a decrease of $38,225 or 100%. The decrease is
due to the fact the Company had no revenues.




OPERATING
EXPENSES. Our operating expenses consist primarily of payroll and related taxes,
professional and consulting services, expenses for executive and administrative
personnel and insurance,  investor and public relations, research and
development,  telephone and communications, facilities expenses,
travel and related expenses, and other general corporate expenses. Our operating
expenses for fiscal 2008 were $3,214,345 compared to fiscal year 2007 operating
expenses of $7,496,801 a decrease of $4,282,456 or 57.1%.





In
addition, employee payroll and related taxes for fiscal 2008 were $887,283
compared to $3,611,596, a decrease of $2,724,313 or 75.4%. This decrease was due
to our continued reduction of our operations, facilities and workforce during
2008.





The
overall decrease is primarily due to a decrease in officers' and directors'
compensation to $435,000 (including non-cash compensation), from $696,790 in the
prior year.





During
2008 and 2007, Sanswire and its subsidiaries incurred payroll tax liability
during the normal course of business at each payroll cycle. The Company
submitted certain withholding tax payments during the first and second quarters
of 2007 through a payroll processor, ADP. Subsequent thereto, the Company no
longer processed its payroll through ADP. The Company did not file its 2007 tax
forms until 2008 but during 2008 the Company has reported its payroll tax
liabilities on a timely basis; however the Company failed to deposit the
appropriate withholding amounts. The Company has recognized this issue and
contacted the IRS accordingly to make arrangement to pay any taxes due, which is
currently estimated to be at least $200,000. The Company may be subject to
penalties and interest from the IRS.


16


We
incurred $1,415,235 of consulting fees, a decrease of $220,068 or 13.5% for 2008
compared to $1,635,303 in 2007. This decrease is primarily related to reduction
of services required to develop and expand our geographical and product
markets.




We
received a $14,856 of research and development refund for our Sanswire project
during 2007, compared to $0 during 2008, a decrease of $14,586 or 100%. During
2008 and 2007, there were no direct expenses for development and building of the
airship. This is due mainly to the fact that Company entered into a revised
agreement with TAO Technologies (See note 3 to the attached financial
statements). The Company believes that further development will increase during
2009 and thus associated expenses are expected to increase for
2009.





During
2008, we incurred $476,827 of general and administrative expenses as compared to
$1,567,968 during 2007. The $1,091,141 decrease was due to a continued
reduction of expenses related to our operations, facilities and workforce during
2008.





LOSS FROM
OPERATIONS. We had an operating loss of ($3,214,345) for fiscal year 2008 as
compared to an operating loss of ($7,458,576) for fiscal 2007, primarily due to
decreased operating expenses as described above, including lower operating costs
and reductions of our various programs.


OTHER
INCOME (EXPENSE). We had net other expenses totaling ($2,224,070) during fiscal
year 2008 compared to ($2,228,096) during fiscal 2007. This variance included
the non cash charges related to the modifications of our convertible debentures
of ($1,096,650) compared to a $254,200 gain in 2007.





Interest
expense for fiscal year 2008 was $1,127,420 compared to $2,482,296 for the prior
year. Interest expense decrease was primarily due to a reduction in noncash
financing charges associated with the Company’s convertible
debentures.





LOSS FROM
DISCONTINUED OPERATIONS. During 2008 we had a loss of ($197), related to our
discontinued operations compared to a loss of ($1,918,806) during fiscal year
2007. See note 2 in the financial statements for more information regarding the
discontinued operations.





NET LOSS.
We had a net loss of ($5,438,612) in fiscal year 2008 compared to a net loss of
($11,605,478) in fiscal 2007. The decrease in net loss is primarily attributable
to the decrease in the operating expenses as discussed
above.


LIQUIDITY
AND CAPITAL RESOURCES





ASSETS.
At December 31, 2008, we had total assets of $3,240,215 compared to total assets
of $32,278 as of December 31, 2007.


The
current assets at December 31, 2008, were $11,215 compared to $50,956 at
December 31, 2007. As of December 31, 2008, we had $4,809 of cash and cash
equivalents compared to $32,378 at December 31, 2007.





The
Company had no deposits as of December 31, 2008 compared to $391,000 as of
December 31, 2007.  The $391,000 relates to payments accrued toward an
agreement reached in May 2008 for $3,229,000 as an investment in a joint
venture.  This deposit was applied as an investment in joint venture
in June 2008.  See note 3 in the financial statements for more
information regarding the transaction.


We had
$6,406 of current assets from discontinued operations as of December 31, 2008 as
compared to $18,678 at December 31, 2007. See note 2 in the financial statements
for more information regarding the discontinued operations.





LIABILITIES.
At December 31, 2008, we had total liabilities of $17,944,125 compared to total
liabilities of $13,666,678 as of December 31, 2007.


17





The
current liabilities at December 31, 2008 were $17,944,125 compared to
$13,666,678 at December 31, 2007, an increase of $4,277,447. The increase is
principally due to the increase in current portion of payments due on the notes
payable of $1,208,512 (see note 5 of the financial statements), the increase in
accounts payable of $647,055, and the increase in accrued expenses of
$2,421,855.




CASH
FLOWS. Our cash used in operating activities was $909,608 compared to $2,286,113
for the prior year. The decrease was primarily due to the decreased level of
operations and operating activities and changes in our current assets and
liabilities.





During
2008 there was $385,000 used in investing activities which was a payment on
the Sanswire-Tao joint venture compared to $372,500 used in investing
activities of which $130,000 was used as a deposit for the joint venture and
$242,500 from its discontinued operations.




Net cash
provided by financing activities was $1,267,139 principally from the execution
of new convertible debentures, as compared to $2,686,648 in the prior
year.




The
accompanying financial statements have been prepared on a going concern basis,
which contemplates the realization of assets and the settlement of liabilities
and commitments in the normal course of business. As reflected in the
accompanying financial statements, the Company had a net loss of $5,438,612 and
a negative cash flow from operations of $909,608 for the year ended December 31,
2008, and had a working capital deficiency of $17,932,910 and a stockholders’
deficit of $14,703,910 at December 31, 2008.  These factors raise
substantial doubt about the Company’s ability to continue as a going concern.
The ability of the Company to continue as a going concern is dependent upon the
Company’s ability to raise additional funds and implement its business plan. The
financial statements do not include any adjustments that might be necessary if
the Company is unable to continue as a going concern.





Throughout
2008 and continuing into 2009, the Company has been dependent upon monthly
funding from its existing debt holders. Funding decisions have typically not
extended beyond thirty days at any given time, and the Company does not
currently have a defined funding source. Funding delays and uncertainties have
seriously damaged vendor relationships, new product development and revenues. In
the absence of continued monthly funding by its current debt holders, the
Company would have insufficient funds to continue operations. There is no
assurance that additional funding from the current debt holders will be
available or available on terms and conditions acceptable to the
Company.




During
2009, the Company has subsequently raised approximately $140,000 from investors;
however this is not adequate funding to cover the estimated working capital
deficit of approximately $17.9 million or the net loss for 2008 of approximately
$6 million.  The Company is currently working to secure additional
funding for its current operations as well as for the payments associated with
the Company’s joint venture.
 
 As
reflected in the accompanying financial statements, for the year ended December
31, 2008 we had a net loss of ($5,438,612) compared to a 2007 net loss of
($11,605,478). Consequently, there is an accumulated deficit of ($125,834,338)
at December 31, 2008 compared to ($120,395,726) at December 31,
2007.





CRITICAL
ACCOUNTING POLICIES





REGISTRATION
RIGHTS




In
connection with the sale of debt or equity instruments, we may enter into
Registration Rights Agreements. Generally, these Agreements require us to file
registration statements with the Securities and Exchange Commission to register
common shares that may be issued on conversion of debt or preferred stock, to
permit re-sale of common shares previously sold under an exemption from
registration or to register common shares that may be issued on exercise of
outstanding options or warrants.


18




These
Agreements usually require us to pay penalties for any time delay in filing the
required registration statements, or in the registration statements becoming
effective, beyond dates specified in the Agreement. These penalties are usually
expressed as a fixed percentage, per month, of the original amount we received
on issuance of the debt or preferred stock, common shares, options or warrants.
We account for these penalties when it is probable that a penalty will be
incurred. At December 31, 2008 the Company has no registration rights agreement
requiring penalties to be recorded.




REVENUE
RECOGNITION





Revenue
is recognized when there is persuasive evidence of an arrangement, goods are
shipped and title passes, collection is probable, and the fee is fixed or
determinable.  The Company records deferred revenue when cash is
received in advance of the revenue recognition criteria being met.





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.





STOCK-BASED
COMPENSATION




The
Company adopted SFAS No. 123(R) using the prospective transition method,
which requires the application of the accounting standard as of January 1,
2006, the first day of its year ended December 31, 2006. In accordance with
this transition method, the Company’s consolidated financial statements for
prior periods have not been restated to reflect, and do not include the impact
of, SFAS No. 123(R). The Company’s consolidated financial statements for
the year ended December 31, 2008 and 2007 reflect the impact of SFAS
No. 123(R). Upon adopting SFAS No. 123(R), for awards with service
conditions and graded-vesting, a one-time election was made to recognize
stock-based compensation expense on a straight-line basis over the requisite
service period for the entire award.
  Stock-based
compensation expense recognized under SFAS No. 123(R) for the years ended
December 31, 2008 and 2007 were $712,501 and $1,667,107, respectively.





The
Company’s determination of fair value of share-based payment awards to employees
and directors on the date of grant uses the Black-Scholes model, which is
affected by the Company’s stock price as well as assumptions regarding a number
of highly complex and subjective variables. These variables include, but are not
limited to our expected stock price volatility over the term of the awards, and
actual and projected employee stock option exercise
behaviors.  Forfeitures are recognized as incurred.




The
Company accounts for stock option and warrant grants issued to non-employees for
goods and services using the guidance of SFAS No. 123 and Emerging Issues
Task Force (“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,” whereby the fair value of such option and warrant grants is
determined using the Black-Scholes option pricing model at the earlier of the
date at which the non-employee’s performance is completed or a performance
commitment is reached.


19





RECENTLY
ISSUED ACCOUNTING PRONOUNCEMENTS




SFAS No.
159,The Fair Value Option of Financial
Assets and Financial Liabilities (SFAS No. 159)




In
February 2007, the FASB issued SFAS No. 159. The Fair Value Option of Financial
Assets and Financial Liabilities (“SFAS No. 159”). SFAS No. 159
provides an option to report selected financial assets and financial liabilities
using fair value. The standard establishes required presentation and disclosures
to facilitate comparisons with companies that use different measurements for
similar assets and liabilities. The Company does not expect that the adoption of
SFAS No. 159 for financial assets and financial liabilities to have a
material impact on our consolidated financial statements in subsequent reporting
periods.





SFAS No. 141 (R),Business
Combinations (SFAS No. 141R)and SFAS
No. 160, Non-controlling
Interests in Consolidated Financial Statements (SFAS No.
160)




In
December 2007, the FASB issued SFAS No. 141R, Business Combinations, and SFAS
No. 160, Non-controlling Interests in Consolidated Financial Statements.
SFAS No. 141R requires an acquirer to measure the identifiable assets acquired,
the liabilities assumed, and any non-controlling interest in the acquiree at
their fair values on the acquisition date, with goodwill being the excess value
over the net identifiable assets acquired. SFAS No. 160 clarifies that a
non-controlling interest in a subsidiary should be reported as equity in the
consolidated financial statement. The calculation of earnings per share will
continue to be based on income amounts attributable to the parent. SFAS
No. 141R and SFAS No. 160 are effective for financial statements
issued for fiscal years beginning after December 15, 2008. Early adoption is
prohibited. The Company does not expect that the adoption of SFAS 141R or SFAS
No. 160 to have a material impact on our financial condition and results of
operations, although its effects on future periods will depend on the nature and
significance of business combinations subject to this statement.





SFAS
No. 161,Disclosures about
Derivative Instruments and Hedging Activities (SFAS No. 161)





In March
2008, the FASB issued FASB Statement No. 161, “Disclosures about Derivative
Instruments and Hedging Activities”. The new standard is intended to improve
financial reporting about derivative instruments and hedging activities by
requiring enhanced disclosures to enable investors to better understand their
effects on an entity’s financial position, financial performance, and cash
flows. SFAS 161 is effective for fiscal years and interim periods beginning
after November 15, 2008. The Company does not expect the adoption of SFAS 161 to
have a material impact on the presentation of our annual and interim period
disclosures.





Management
does not believe that there are any recently-issued, but not yet effective
accounting pronouncements, which could have a material effect on the
accompanying condensed consolidated financial statements





RISK
FACTORS





Risks
Related to Our Business and Industry





We
need to raise a significant amount of additional capital to meet our current and
future business requirements and such capital raising may be costly or difficult
to obtain and could dilute current stockholders’ ownership
interests.





We need
to raise $4.5 million of additional financing in order to meet our cash
requirements for the next twelve (12) months and to fully implement our business
plan during the next twelve months.  The funds would be used to
increase manufacturing of our products, expand our research and development
efforts, and attract a larger talented sales force.  We intend to
raise the financing from the sale of common stock in one or more private
placements or public offerings and/or from bank financing.  We do not
have any firm commitments or identified sources of additional capital from third
parties or from our officers, directors or shareholders.  Although our
officers and directors or their affiliates have in the past facilitated capital
for us, or provided us with capital, they are not legally bound to do
so.  There can be no assurance that additional capital will be
available to us, or that, if available, it will be on terms satisfactory to
us.  Any  additional financing may involve dilution to our
shareholders.  If we are unable to raise additional financing on terms
satisfactory to us, or at all, we would not be able to fully implement our
business plan which would have a materially adverse effect our business and
financial position and could cause us to delay, curtail, scale back or forgo
some or all of our operations or we could cease to exist.


20


We
have a history of operating and net losses which we anticipate will
continue.





We have a
history of losses from operations.  We anticipate that for the
foreseeable future, we will continue to experience losses from
operations.  We had a net loss from continuing operations of
$5,438,415 during fiscal 2008 and a net loss from continuing operations of
$9,686,672 during fiscal 2007.  We anticipate that our net loss will
increase for fiscal 2009.





Our
independent auditors have expressed substantial doubt about our ability to
continue as a going concern.





In its
report dated March 30, 2009, our independent auditors, Weinberg and Company,
P.A., expressed an opinion that there is substantial doubt about our ability to
continue as a going concern because we have suffered recurring losses from
operations and we have an accumulated deficit and a working capital
deficit.  We expect to continue to incur losses for the foreseeable
future.  The accompanying financial statements have been prepared
assuming that we will continue as a going concern.  The financial
statements do not include any adjustments relating to the recoverability of
recorded assets, or the amounts and classification of liabilities that might be
necessary in the event we cannot continue in existence. Our continuation as a
going concern is dependent upon future events, including the acquisition of
additional capital to fully implement our business plan.  There can be
no assurance these future events will occur or that we will continue as a going
concern even if they do occur.  If we are unable to continue as a
going concern, you will lose your entire investment.





If
we fail to protect our intellectual property rights, our competitors may take
advantage of our ideas to compete more effectively with us.





Our
proprietary rights are one of the keys to our performance and ability to remain
competitive. We rely on a combination of patent, trademark, copyright and trade
secret laws in the U.S. and other jurisdictions as well as confidentiality
agreements and procedures, non-compete agreements and other contractual
provisions to protect our intellectual property, other proprietary rights and
our brand.  Our intellectual property rights may be challenged,
invalidated or circumvented by third parties. We may not be able to prevent the
unauthorized disclosure or use of our technical knowledge or other trade secrets
by employees. Furthermore, the laws of foreign countries may not protect our
intellectual property rights to the same extent as the laws of the U.S.
Litigation may be necessary to enforce our intellectual property rights which
could result in substantial costs to us and substantial diversion of management
attention. If we do not adequately protect our intellectual property, our
competitors could use it to enhance their products.  Our inability to
adequately protect our intellectual property rights could adversely affect our
business and financial condition, and the value of our brand name and other
intangible assets.





Risk
Related To Ownership of Our Common Stock





There
is currently a small market for our common stock, and we expect that any market
that does develop will be illiquid and extremely volatile.





As of
March 31, 2009, we had approximately twenty one thousand (21,000) shareholders
of record, and we had been subject to the reporting requirements of the Exchange
Act for at least ninety (90) days.  There were shares of our common
stock that had been held by non-affiliates for a minimum of one year which could
be freely resold under Rule 144, and shares of our common stock that had been
held by such persons for a minimum of six months which could be resold under
Rule 144 subject to public information requirements for reporting
issuers.  There were also shares of our common stock that had been
held by affiliates for a minimum of six months which could be resold under Rule
144 subject to the volume limitations, manner of sale provisions, public
information requirements for reporting issuers and notice
requirements.


21


The
market for our common stock is illiquid and subject to wide fluctuations in
response to several factors, including, but not limited to:




·
            limited
      numbers of buyers and sellers in the market;·
            actual  or  anticipated  variations  in  our  results  of  operations;





·
            our
      ability or inability to generate new revenues;·
            increased
      competition; and




Furthermore,
our stock price may be impacted by factors that are unrelated or
disproportionate to our operating performance which include stock market
fluctuations, general economic, political and overall global market conditions,
such  as  recessions, interest rates or international
currency fluctuations. Any and all of these factors, while unrelated directly to
us, may adversely affect the market price and liquidity of our common
stock.





We
have authorized preferred stock which can be designated by our board of
directors without shareholder approval.





We have
authorized 10,000,000 shares of preferred stock.  The shares of
preferred stock may be issued from time to time in one or more series, each of
which shall have distinctive designation or title as shall be determined by our
board of directors prior to the issuance of any shares thereof. The preferred
stock shall have such voting powers, full or limited, or no voting powers, and
such preferences and relative, participating, optional or other special rights
and such qualifications, limitations or restrictions thereof as adopted by our
board of directors. Because our board of directors is able to designate the
powers and preferences of the preferred stock without the vote of the holders of
our common stock, the holders of our common stock will have no control over what
designations and preferences our preferred stock will have. As a result of this,
our board of directors could designate one or more series of preferred stock
with superior rights to the rights of the holders of our common
stock.





We
do not expect to pay dividends for the foreseeable future.





We have
not declared or paid, and do not anticipate declaring or paying in the
foreseeable future, any cash dividends on our common stock.  Our
ability to pay dividends is dependent upon, among other things, our future
earnings, operating and financial condition, our capital requirements, general
business conditions and other pertinent factors, and is subject to the
discretion of our board of directors.  Accordingly, there is no
assurance that any dividends will ever be paid on our common stock.





Investors may face significant
restrictions on the resale of our common stock due to federal regulations of
penny stock.





Our
common stock is subject to the requirements of Rule 15(g)9, promulgated under
the Securities Exchange Act as long as the price of our common stock is below
$5.00 per share. Under such rule, broker-dealers who recommend low-priced
securities to persons other than established customers and accredited investors
must satisfy special sales practice requirements, including a requirement that
they make an individualized written suitability determination for the purchaser
and receive the purchaser's consent prior to the transaction. The Securities
Enforcement Remedies and Penny Stock Reform Act of 1990, also requires
additional disclosure in connection with any trades involving a stock defined as
a penny stock. Generally, the SEC defines a penny stock as any equity security
not traded on an exchange or quoted on NASDAQ that has a market price of less
than $5.00 per share. The required penny stock disclosures include the delivery,
prior to any transaction, of a disclosure schedule explaining the penny stock
market and the risks associated with it. Such requirements could severely limit
the market liquidity of the securities and the ability of purchasers to sell
their securities in the secondary market.  In addition, various state
securities laws impose restrictions on transferring penny stocks.





ITEM
7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.





NA


22





ITEM
8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


23


Report
of Independent Registered Public Accounting Firm





To the
Board of Directors and Stockholders of:


Sanswire
Corp. (formerly known as GlobeTel Communications Corp.) and
Subsidiaries





We have
audited the accompanying consolidated balance sheets of Sanswire Corp. (formerly
known as GlobeTel Communications Corp.) and Subsidiaries (the “Company”),
as of December 31, 2008 and 2007, and the related consolidated statements of
operations, stockholders' deficit, and cash flows for the years then ended.
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 standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.





We were
not engaged to examine management’s assertion about the effectiveness of
Sanswire Corp. (formerly known as GlobeTel Communications Corp.) and
Subsidiaries’ internal control over financial reporting as of December 31, 2008
included in the Company’s Item 9A “Controls and Procedures” in the Annual Report
on Form 10-K and, accordingly, we do not express an opinion
thereon.





In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Sanswire Corp.
(formerly known as GlobeTel Communications Corp.) and Subsidiaries as of
December 31, 2008 and 2007 and the consolidated results of their operations and
their cash flows for the years then ended, in conformity with accounting
principles generally accepted in the United States of America.





The
accompanying consolidated financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company has experienced net losses and
negative cash flows from operations and expects such losses to continue. These
conditions raise substantial doubt about the Company’s ability to continue as a
going concern. Management’s plans in regard to these matters are also described
in Note 1. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.





As
discussed in Note 1, on May 2, 2008, the Securities and Exchange Commission
(“SEC”) filed a lawsuit in the United States District Court for the Southern
District of Florida against GlobeTel Communications Corp. (the “Company”) and
three former officers of the Company, Timothy J. Huff, Thomas Y. Jimenez and
Lawrence E. Lynch. The SEC alleges, among other things, that the Company
recorded $119 million in revenue on the basis of fraudulent invoices created by
Joseph Monterosso and Luis Vargas, two individuals formerly employed by the
Company who were in charge of its wholesale telecommunications business. The SEC
alleges that the Company violated Sections 5(a), 5(c), and 17(a) of the
Securities Act of 1933, as amended, Sections 10(b), 13(a), 13(b)(2)(A) and
13(b)(2)(B) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), and Rules 10b-5, 12b-20, 13a-1, 13a-11 and 13a-13 under the Exchange Act.
The SEC seeks as relief a permanent injunction, civil penalties, and
disgorgement with prejudgment interest. The Company has advised that it intends
to vigorously defend itself in this action. The SEC lawsuit states that the
staff is also considering recommending that the SEC authorize and institute
proceedings to revoke the registration of Company’s securities pursuant to
Section 12(j) of the Exchange Act. The consolidated financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.





Weinberg
& Company, P.A.





Boca
Raton, Florida


March 30,
2009


24


SANSWIRE
CORP. (FORMERLY GLOBETEL COMMUNICATIONS CORP.)


AND
SUBSIDIARIES


CONSOLIDATED
BALANCE SHEETS




DECEMBER 31,
                                2008
                              
                              
                              DECEMBER 31,
                                2007ASSETSCURRENT
      ASSETSCash
      and cash equivalents
                              
                              $
                              4,809
                              
                              
                              $
                              32,278Current
      assets from discontinued operations
                              
                              
                              6,406
                              
                              
                              
                              18,678TOTAL
      CURRENT ASSETS
                              
                              
                              11,215
                              
                              
                              
                              50,956Deposits
                              
                              
                              —
                              
                              
                              
                              391,000Investment
      in joint venture
                              
                              
                              3,229,000
                              
                              
                              
                              —TOTAL
      NONCURRENT ASSETS
                              
                              
                              3,229,000
                              
                              
                              
                              391,000TOTAL
      ASSETS
                              
                              $
                              3,240,215
                              
                              
                              $
                              441,956LIABILITIES
      AND STOCKHOLDERS’ DEFICITLIABILITIESCURRENT
      LIABILITIESAccounts
      payable
                              
                              $
                              3,802,777
                              
                              
                              $
                              3,155,722Notes
      and convertible notes payable, net of discount of $134,423 and
      $1,257,364
                              
                              
                              9,264,732
                              
                              
                              
                              8,056,220Accrued
      expenses and other liabilities
                              
                              
                              3,489,210
                              
                              
                              
                              1,067,355Current
      liabilities from discontinued operations
                              
                              
                              1,387,406
                              
                              
                              
                              1,387,381TOTAL
      LIABILITIES
                              
                              
                              17,944,125
                              
                              
                              
                              13,666,678COMMITMENTS
      AND CONTINGENCIESSTOCKHOLDERS'
      DEFICITSeries
      A Preferred stock, $.001 par value, 250,000 shares
    authorized;no
      shares issued and outstanding:
                              
                              
                              —
                              
                              
                              
                              —Series
      B Preferred stock, $.001 par value, 500,000 shares
    authorized;no
      shares issued and outstanding:
                              
                              
                              —
                              
                              
                              
                              —Series
      C Preferred stock, $.001 par value, 5,000 shares
    authorized;no
      shares issued and outstanding:
                              
                              
                              —
                              
                              
                              
                              —Series
      D Preferred stock, $.001 par value, 5,000 shares
    authorized;no
      shares issued and outstanding:
                              
                              
                              —
                              
                              
                              
                              —Common
      stock, $.00001 par value, 250,000,000 shares authorized;184,704,015
      and 129,756,897 shares issued and outstanding
                              
                              
                              1,848
                              
                              
                              
                              1,299Additional
      paid-in capital
                              
                              
                              111,128,580
                              
                              
                              
                              107,169,705Accumulated
      deficit
                              
                              
                              (125,834,338
                              )
                              
                              
                              (120,395,726
                              )TOTAL
      STOCKHOLDERS' DEFICIT
                              
                              
                              (14,703,910
                              )
                              
                              
                              (13,224,722
                              )TOTAL
      LIABILITIES AND STOCKHOLDERS' DEFICIT
                              
                              $
                              3,240,215
                              
                              
                              $
                              441,956





See
accompanying notes to consolidated financial statements


25





SANSWIRE
CORP. (FORMERLY GLOBETEL COMMUNICATIONS CORP.)


AND
SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF OPERATIONS


FOR THE YEARS ENDED DECEMBER
31,




2008
                                    
                                    
                                    2007REVENUES
                                    
                                    $
                                    —
                                    
                                    
                                    $
                                    53,754COST
      OF REVENUES
                                    
                                    
                                    —
                                    
                                    
                                    
                                    15,529GROSS
      MARGIN
                                    
                                    
                                    —
                                    
                                    
                                    
                                    38,225EXPENSESPayroll
      and related taxes
                                    
                                    
                                    887,283
                                    
                                    
                                    
                                    3,611,596Consulting
      fees
                                    
                                    
                                    1,415,235
                                    
                                    
                                    
                                    1,635,303Noncash
      officers' and directors' compensation
                                    
                                    
                                    435,000
                                    
                                    
                                    
                                    696,790Research
      and development
                                    
                                    
                                    —
                                    
                                    
                                    
                                    (14,856
                                    )General
      and administrative
                                    
                                    
                                    476,827
                                    
                                    
                                    
                                    1,567,968TOTAL
      EXPENSES
                                    
                                    
                                    3,214,345
                                    
                                    
                                    
                                    7,496,801LOSS
      FROM OPERATIONS
                                    
                                    
                                    (3,214,345
                                    )
                                    
                                    
                                    (7,458,576
                                    )OTHER
      INCOME (EXPENSE)Loss/Gain
      on extinguishment of debt
                                    
                                    
                                    (1,096,650
                                    )
                                    
                                    
                                    254,200Interest
      expense, net
                                    
                                    
                                    (1,127,420
                                    )
                                    
                                    
                                    (2,482,296
                                    )NET
      OTHER EXPENSE
                                    
                                    
                                    (2,224,070
                                    )
                                    
                                    
                                    (2,228,096
                                    )LOSS
      FROM CONTINUING OPERATIONS
                                    
                                    
                                    (5,438,415
                                    )
                                    
                                    
                                    (9,686,672
                                    )LOSS
      FROM DISCONTINUED OPERATIONS
                                    
                                    
                                    (197
                                    )
                                    
                                    
                                    (1,918,806
                                    )NET
      LOSS
                                    
                                    $
                                    (5,438,612
                                    )
                                    
                                    $
                                    (11,605,478
                                    )WEIGHTED
      AVERAGE NUMBER OF COMMON SHARES OUTSTANDINGBASIC
      and DILUTED
                                    
                                    
                                    151,534,774
                                    
                                    
                                    
                                    121,171,392LOSS
      PER SHARE FROM CONTINUING OPERATIONSBASIC
      and DILUTED
                                    
                                    $
                                    (
      0.04
                                    )
                                    
                                    $
                                    (
      0.08
                                    )LOSS
      PER SHARE FROM DISCONTINUED OPERATIONSBASIC
      and DILUTED
                                    
                                    $
                                    (
      0.00
                                    )
                                    
                                    $
                                    (
      0.02
                                    )NET
      LOSS PER SHAREBASIC
      and DILUTED
                                    
                                    $
                                    (
      0.04
                                    )
                                    
                                    $
                                    (
      0.10
                                    )




See
accompanying notes to consolidated financial statements


26




SANSWIRE
CORP. (FORMERLY GLOBETEL COMMUNICATIONS CORP.)


AND
SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' DEFICIT


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007





COMMON STOCKADDITIONAL
                
                
                STOCKPAID-IN
                
                
                SUBSCRIPTIONSDescription
                
                SHARES
                
                
                AMOUNT
                
                
                CAPITAL
                
                
                RECEIVABLEBALANCE,
      DECEMBER 31, 2006
                
                
                109,470,803
                
                
                $
                1,095
                
                
                $
                94,733,346
                
                
                $
                (130,282
                )Shares
      issued for cash
                
                
                3,750,000
                
                
                
                38
                
                
                
                749,962
                
                
                
                —Shares
      issued for services
                
                
                6,824,920
                
                
                
                68
                
                
                
                1,667,039
                
                
                
                —Shares
      issued for settlement of debt obligations
                
                
                1,333,333
                
                
                
                13
                
                
                
                4,598,320
                
                
                
                —Shares
      issued related to discontinued operations
                
                
                4,001,599
                
                
                
                41
                
                
                
                1,056,438
                
                
                
                —Shares
      issued for interest and financing costs
                
                
                1,572,951
                
                
                
                16
                
                
                
                557,616
                
                
                
                —Shares
      issued for conversion of notes
                
                
                939,005
                
                
                
                9
                
                
                
                98,556
                
                
                
                —Shares
      issued for deposit
                
                
                1,864,286
                
                
                
                19
                
                
                
                260,981
                
                
                
                —Writedown
      of receivable related to options
                
                
                —
                
                
                
                —
                
                
                
                (130,282
                )
                
                
                130,282Options
      issued for executive compensation
                
                
                —
                
                
                
                —
                
                
                
                1,922,992
                
                
                
                —Change
      of fair value of warrants
                
                
                —
                
                
                
                —
                
                
                
                421,737
                
                
                
                —Warrants
      issued for and beneficial conversion feature for convertible
      notes
                
                
                —
                
                
                
                —
                
                
                
                1,233,000
                
                
                
                —Net
      loss
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —BALANCE,
      DECEMBER 31, 2007
                
                
                129,756,897
                
                
                $
                1,299
                
                
                $
                107,169,705
                
                
                $
                —Shares
      issued for conversion of notes
                
                
                27,265,195
                
                
                
                272
                
                
                
                1,788,566
                
                
                
                —Shares
      issued for services
                
                
                12,269,444
                
                
                
                123
                
                
                
                712,378
                
                
                
                —Shares
      issued for settlement of debt
                
                
                2,700,701
                
                
                
                27
                
                
                
                99,647
                
                
                
                —Shares
      issued for accrued expenses
                
                
                6,831,778
                
                
                
                68
                
                
                
                367,852
                
                
                
                —Shares
      issued for interest
                
                
                3,200,000
                
                
                
                32
                
                
                
                189,368
                
                
                
                —Shares
      issued for joint
      venture
                
                
                2,680,000
                
                
                
                27
                
                
                
                267,973
                
                
                
                —Options
      issued for executive compensation
                
                
                —
                
                
                
                —
                
                
                
                244,831
                
                
                
                —Warrants
      issued for and beneficial conversion feature for convertible
      notes
                
                
                —
                
                
                
                —
                
                
                
                288,260
                
                
                
                —Net
      loss
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —BALANCE,
      DECEMBER 31, 2008
                
                
                184,704,015
                
                
                $
                1,848
                
                
                $
                111,128,580
                
                
                $
                —




See
accompanying notes to consolidated financial statements


27





SANSWIRE
CORP. (FORMERLY GLOBETEL COMMUNICATIONS CORP.)


AND
SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' DEFICIT


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007





SERIES AADDITIONAL
                
                
                STOCKPAID-IN
                
                
                SUBSCRIPTIONSDescription
                
                SHARES
                
                
                AMOUNT
                
                
                CAPITAL
                
                
                RECEIVABLEBALANCE,
      DECEMBER 31, 2006
                
                
                —
                
                
                $
                —
                
                
                $
                —
                
                
                $
                —Shares
      issued for cash
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Shares
      issued for services
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Shares
      issued for settlement of debt obligations
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Shares
      issued related to discontinued operations
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Shares
      issued for interest and financing costs
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Shares
      issued for conversion of notes
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Shares
      issued for deposit
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Writedown
      of receivable related to options
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Options
      issued for executive compensation
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Change
      of fair value of warrants
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Warrants
      issued for and beneficial conversion feature for convertible
      notes
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Net
      loss
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —BALANCE,
      DECEMBER 31, 2007
                
                
                —
                
                
                $
                —
                
                
                $
                —
                
                
                $
                —Shares
      issued for conversion of notes
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Shares
      issued for services
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Shares
      issued for settlement of debt
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Shares
      issued for accrued expenses
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Shares
      issued for interest
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Shares
      issued for joint venture
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Options
      issued for executive compensation
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Warrants
      issued for and beneficial conversion feature for convertible
      notes
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Net
      loss
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —BALANCE,
      DECEMBER 31, 2008
                
                
                —
                
                
                $
                —
                
                
                $
                —
                
                
                $
                —




See
accompanying notes to consolidated financial statements




28




SANSWIRE
CORP. (FORMERLY GLOBETEL COMMUNICATIONS CORP.)


AND
SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' DEFICIT


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007




SERIES BADDITIONAL
                        
                        
                        STOCKPAID-IN
                        
                        
                        SUBSCRIPTIONSDescription
                        
                        SHARES
                        
                        
                        AMOUNT
                        
                        
                        CAPITAL
                        
                        
                        RECEIVABLEBALANCE, DECEMBER 31, 2006
                        
                        
                        —
                        
                        
                        $
                        —
                        
                        
                        $
                        —
                        
                        
                        $
                        —Shares
      issued for cash
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —Shares
      issued for services
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —Shares
      issued for settlement of debt obligations
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —Shares
      issued related to discontinued operations
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —Shares
      issued for interest and financing costs
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —Shares
      issued for conversion of notes
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —Shares
      issued for deposit
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —Writedown
      of receivable related to options
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —Options
      issued for executive compensation
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —Change
      of fair value of warrants
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —Warrants
      issued for and beneficial conversion feature for convertible
      notes
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —Net
      loss
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —BALANCE,
      DECEMBER 31, 2007
                        
                        
                        —
                        
                        
                        $
                        —
                        
                        
                        $
                        —
                        
                        
                        $
                        —Shares
      issued for conversion of notes
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —Shares
      issued for services
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —Shares
      issued for settlement of debt
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —Shares
      issued for accrued expenses
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —Shares
      issued for interest
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —Shares
      issued for joint venture
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —Options
      issued for executive compensation
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —Warrants
      issued for and beneficial conversion feature for convertible
      notes
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —Net
      loss
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —BALANCE,
      DECEMBER 31, 2008
                        
                        
                        —
                        
                        
                        $
                        —
                        
                        
                        $
                        —
                        
                        
                        $
                        —




See
accompanying notes to consolidated financial statements




29


SANSWIRE
CORP. (FORMERLY GLOBETEL COMMUNICATIONS CORP.)


AND
SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' DEFICIT


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007





SERIES CADDITIONAL
                
                
                STOCKPAID-IN
                
                
                SUBSCRIPTIONSDescription
                
                SHARES
                
                
                AMOUNT
                
                
                CAPITAL
                
                
                RECEIVABLEBALANCE,
      DECEMBER 31, 2006
                
                
                —
                
                
                $
                —
                
                
                $
                —
                
                
                $
                —Shares
      issued for cash
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Shares
      issued for services
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Shares
      issued for settlement of debt obligations
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Shares
      issued related to discontinued operations
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Shares
      issued for interest and financing costs
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Shares
      issued for conversion of notes
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Shares
      issued for deposit
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Writedown
      of receivable related to options
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Options
      issued for executive compensation
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Change
      of fair value of warrantsWarrants
      issued for and beneficial conversion feature for convertible
      notes
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Net
      loss
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —BALANCE,
      DECEMBER 31, 2007
                
                
                —
                
                
                $
                —
                
                
                $
                —
                
                
                $
                —Shares
      issued for conversion of notes
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Shares
      issued for services
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Shares
      issued for settlement of debt
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Shares
      issued for accrued expenses
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Shares
      issued for interest
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Shares
      issued for joint venture
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Options
      issued for executive compensation
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Warrants
      issued for and beneficial conversion feature for convertible
      notes
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Net
      loss
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —BALANCE,
      DECEMBER 31, 2008
                
                
                —
                
                
                $
                —
                
                
                $
                —
                
                
                $
                —




See
accompanying notes to consolidated financial statements




30




SANSWIRE
CORP. (FORMERLY GLOBETEL COMMUNICATIONS CORP.)


AND
SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' DEFICIT


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007





SERIES DADDITIONAL
                
                
                STOCK
                
                
                
                
                
                TOTALPAID-IN
                
                
                SUBSCRIPTIONS
                
                
                ACCUMULATED
                
                
                STOCKHOLDERS'Description
                
                SHARES
                
                
                AMOUNT
                
                
                CAPITAL
                
                
                RECEIVABLE
                
                
                DEFICIT
                
                
                DEFICITBALANCE,
      DECEMBER 31, 2006
                
                
                —
                
                
                $
                —
                
                
                $
                —
                
                
                $
                —
                
                
                $
                (108,790,248
                )
                
                $
                504,589Shares
      issued for cash
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                750,000Shares
      issued for services
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                1,667,107Shares
      issued for settlement of debt obligations
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                4,598,333Shares
      issued related to discontinued operations
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                1,056,479Shares
      issued for interest and financing costs
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                557,632Shares
      issued for conversion of notes
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                98,565Shares
      issued for deposit
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                261,000Writedown
      of receivable related to options
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Options
      issued for executive compensation
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                1,922,992Change
      of fair value of warrants
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                421,737Warrants
      issued for and beneficial conversion feature for convertible
      notes
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                1,233,000Net
      loss
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (11,605,478
                )
                
                
                (11,605,478
                )BALANCE,
      DECEMBER 31, 2007
                
                
                —
                
                
                $
                —
                
                
                $
                —
                
                
                $
                —
                
                
                $
                (120,395,726
                )
                
                $
                (13,224,722
                )Shares
      issued for conversion of notes
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                1,788,838Shares
      issued for services
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                712,501Shares
      issued for settlement of debt
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                99,674Shares
      issued for accrued expenses
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                367,920Shares
      issued for interest
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                189,400Shares
      issued for joint venture
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                268,000Options
      issued for executive compensation
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                244,831Warrants
      issued for and beneficial conversion feature for convertible
      notes
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                288,260Net
      loss
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (5,438,612
                )
                
                
                (5,438,612
                )BALANCE,
      DECEMBER 31, 2008
                
                
                —
                
                
                $
                —
                
                
                $
                —
                
                
                $
                —
                
                
                $
                (125,834,338
                )
                
                $
                (14,703,910
                )




See
accompanying notes to consolidated financial statements





31




SANSWIRE
CORP. (FORMERLY GLOBETEL COMMUNICATIONS CORP.)


AND
SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS


FOR
THE YEARS ENDED DECEMBER 31,




2008
                                    
                                    
                                    2007CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      loss
                                    
                                    $
                                    (5,438,612
                                    )
                                    
                                    $
                                    (11,605,478
                                    )Adjustments
      to reconcile net loss to net cash used by operating
      activities:Amortization
      of debt discount
                                    
                                    
                                    314,549
                                    
                                    
                                    
                                    1,111,963Loss/Gain
      on extinguishment of debt
                                    
                                    
                                    1,096,650
                                    
                                    
                                    
                                    (254,200
                                    )Stock
      based compensation
                                    
                                    
                                    712,501
                                    
                                    
                                    
                                    1,667,107Fair
      value of vested options
                                    
                                    
                                    244,831
                                    
                                    
                                    
                                    1,922,992Fair
      value of modification of warrants for investment
                                    
                                    
                                    —
                                    
                                    
                                    
                                    421,737Interest
      expense on convertible notes payable
                                    
                                    
                                    569,590
                                    
                                    
                                    
                                    558,612Common
      stock exchanged for interest
                                    
                                    
                                    189,400
                                    
                                    
                                    
                                    557,632Common
      stock exchanged for financing costs
                                    
                                    
                                    37,681
                                    
                                    
                                    
                                    —Noncash
      activity from discontinued operations
                                    
                                    
                                    —
                                    
                                    
                                    
                                    1,056,479Decrease
      in assets:Accounts
      receivable
                                    
                                    
                                    —
                                    
                                    
                                    
                                    271,262Deposits
                                    
                                    
                                    —
                                    
                                    
                                    
                                    72,987Decrease
      in assets relating to discontinued operations
                                    
                                    
                                    12,272
                                    
                                    
                                    
                                    141,735Increase
      in liabilities:Accounts
      payable
                                    
                                    
                                    746,729
                                    
                                    
                                    
                                    692,117Accrued
      expenses and other liabilities
                                    
                                    
                                    604,776
                                    
                                    
                                    
                                    607,258Increase
      in liabilities relating to discontinued operations
                                    
                                    
                                    25
                                    
                                    
                                    
                                    491,684NET
      CASH USED BY OPERATING ACTIVITIES
                                    
                                    
                                    (909,608
                                    )
                                    
                                    
                                    (2,286,113
                                    )CASH
      FLOWS FROM INVESTING ACTIVITIESPayment
      on joint venture
                                    
                                    
                                    (385,000
                                    )
                                    
                                    
                                    —Deposit
      for joint venture
                                    
                                    
                                    —
                                    
                                    
                                    
                                    (130,000
                                    )Investing
      activities from discontinued operations
                                    
                                    
                                    —
                                    
                                    
                                    
                                    (242,500
                                    )NET
      CASH USED BY INVESTING ACTIVITIES
                                    
                                    
                                    (385,000
                                    )
                                    
                                    
                                    (372,500
                                    )CASH
      FLOWS FROM FINANCING ACTIVITIESIssuance
      of common stock – exercises of warrants
                                    
                                    
                                    —
                                    
                                    
                                    
                                    750,000Payments
      on notes payable
                                    
                                    
                                    (25,139
                                    )
                                    
                                    
                                    —Proceeds
      from notes and loans payable
                                    
                                    
                                    1,292,278
                                    
                                    
                                    
                                    1,951,312Bank
      overdraft
                                    
                                    
                                    —
                                    
                                    
                                    
                                    (14,664
                                    )NET
      CASH PROVIDED BY FINANCING ACTIVITIES
                                    
                                    
                                    1,267,139
                                    
                                    
                                    
                                    2,686,648NET
      (DECREASE) INCREASE IN CASH AND EQUIVALENTS
                                    
                                    
                                    (27,469
                                    )
                                    
                                    
                                    28,035CASH
      AND EQUIVALENTS – BEGINNING OF PERIOD
                                    
                                    
                                    32,278
                                    
                                    
                                    
                                    4,243CASH
      AND EQUIVALENTS – ENDING OF PERIOD
                                    
                                    $
                                    4,809
                                    
                                    
                                    $
                                    32,278SUPPLEMENTAL
      DISCLOSURESCash
      paid during the period for:Interest
                                    
                                    $
                                    16,200
                                    
                                    
                                    $
                                    25,083NON-CASH
      INVESTING AND FINANCING ACTIVITIES:Shares
      issued for debts
                                    
                                    
                                    —
                                    
                                    
                                    
                                    4,840,833Shares
      issued for joint venture
                                    
                                    
                                    268,000
                                    
                                    
                                    
                                    261,000Shares
      for accrued expenses
                                    
                                    
                                    367,920
                                    
                                    
                                    
                                    —Shares
      issued for accounts payable
                                    
                                    
                                    99,674
                                    
                                    
                                    
                                    —Deposit
      applied to accrued expenses
                                    
                                    
                                    659,000
                                    
                                    
                                    
                                    —Accrued
      expense for joint venture
                                    
                                    
                                    2,844,000
                                    
                                    
                                    
                                    —Conversion
      of notes payable to common stock
                                    
                                    
                                    1,788,838
                                    
                                    
                                    
                                    98,565Non-cash
      equity-warrant valuation and intrinsic value of beneficial conversion
      associated with convertible notes
                                    
                                    
                                    288,260
                                    
                                    
                                    
                                    1,233,000




See
accompanying notes to consolidated financial statements


32


SANSWIRE
CORP. (FORMERLY GLOBETEL COMMUNICATIONS CORP.)


AND
SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


YEARS
ENDED DECEMBER 31, 2008 AND 2007





NOTE
1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES





NATURE OF
OPERATIONS





From 2002
to 2007 Sanswire Corp. (formerly known as Globetel Communications Corp.)
("Sanswire") (the “Company”) was involved in the following business sectors:
stored value card services; wholesale telecommunications services; voice over
IP; wireless broadband; and high altitude airships. These business units
operated through various subsidiaries. The Company has discontinued operations
in all but the high altitude airship sector.





On
September 22, 2008 the Company filed a Certificate of Merger with the Secretary
of State of the State of Delaware pursuant to which the wholly owned subsidiary,
Sanswire Corp., a Delaware corporation, was merged into the Company. As a result
of the filing of the Certificate of Merger, the corporate name was changed from
GlobeTel Communications Corp. to Sanswire Corp. The opportunities associated
with Sanswire are related to the Lighter Than Air (LTA) Unmanned Aerial Vehicle
(UAV) market. Sanswire seeks to build and run a UAV business that includes low-,
mid- and high-altitude, lighter-than-air vehicles. Sanswire intends to provide
customers seamless wireless broadband capabilities and surveillance sensor
suites utilizing its High Altitude Airship technology.





Sanswire’s
main products are airships, which provide a platform to transmit wireless
capabilities from air to ground.





The High
Altitude class of prospective airships are generally referred to as HAAs
(High Altitude Airships) but have also been called HAPs and HALEs (High Altitude
Platforms, High Altitude Long Endurance). They have been designed to be able to
keep a station in one location in the Stratosphere, at approximately 65,000 ft
for durations of 30 days or more.





ORGANIZATION
AND CAPITALIZATION





The
Company was organized in July 2002, under the laws of the State of Delaware.
Upon its incorporation, Sanswire 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 the Company.
Subsequently, ADGI was merged into the Company, 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 Sanswire
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, the Company 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 accounted for the reverse stock split,
unless otherwise noted.





33





In the
Company's annual shareholders meeting on June 21, 2006, the shareholders voted
to increase the shares authorized from 150,000,000 to 250,000,000.





BASIS OF
PRESENTATION





The
financial statements include the accounts of Sanswire Corp. ("Sanswire," the
“Company”) and its wholly-owned subsidiaries: Sanswire Networks, LLC(“Sanswire
Networks”); 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%.





Inter-company
balances and transactions were eliminated in the consolidation.





GOING
CONCERN




The
accompanying financial statements have been prepared on a going concern basis,
which contemplates the realization of assets and the settlement of liabilities
and commitments in the normal course of business. As reflected in the
accompanying financial statements, the Company had a net loss of $5,438,612 and
a negative cash flow from operations of $909,608 for the year ended December 31,
2008, and had a working capital deficiency of $17,932,910 and a stockholders’
deficit of $14,703,910 at December 31, 2008.  These factors raise
substantial doubt about the Company’s ability to continue as a going concern.
The ability of the Company to continue as a going concern is dependent upon the
Company’s ability to raise additional funds and implement its business plan. The
financial statements do not include any adjustments that might be necessary if
the Company is unable to continue as a going concern.





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 December 31, 2009. However, if
budgeted sales levels are not achieved and/or if significant unanticipated
expenditures occur, or if it is 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. As of the date of this report the Company has continued to raise
capital to sustain its current operations which have been reduced since January
1, 2008.  The Company will need to periodically seek investment to provide
cash for operations until such time that operations provide sufficient cash flow
to cover expenditures. (see also next paragraph)





On May 2,
2008, the Securities and Exchange Commission (“SEC”) filed a lawsuit in the
United States District Court for the Southern District of Florida against
GlobeTel Communications Corp. (the “Company”) and three former officers of the
Company, Timothy J. Huff, Thomas Y. Jimenez and Lawrence E. Lynch. The SEC
alleges, among other things, that the Company recorded $119 million in revenue
on the basis of fraudulent invoices created by Joseph Monterosso and Luis
Vargas, two individuals formerly employed by the Company who were in charge of
its wholesale telecommunications business.  The SEC alleges that the
Company violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933,
as amended, Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), and Rules 10b-5, 12b-20,
13a-1, 13a-11 and 13a-13 under the Exchange Act. The SEC seeks as relief a
permanent injunction, civil penalties, and disgorgement with prejudgment
interest. The Company intends to vigorously defend itself in this action. The
staff is also considering recommending that the SEC authorize and institute
proceedings to revoke the registration of Company’s securities pursuant to
Section 12(j) of the Exchange Act. (also see Note 9)





CASH AND
CASH EQUIVALENTS





The
Company considers highly liquid debt instruments with an original maturity of
three months or less at the date of purchase to be cash
equivalents.





34




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.





REGISTRATION
RIGHTS




In
connection with the sale of debt or equity instruments, the Company may enter
into Registration Rights Agreements. Generally, these Agreements require the
Company to file registration statements with the Securities and Exchange
Commission to register common shares that may be issued on conversion of debt or
preferred stock, to permit re-sale of common shares previously sold under an
exemption from registration or to register common shares that may be issued on
exercise of outstanding options or warrants.




These
Agreements usually require us to pay penalties for any time delay in filing the
required registration statements, or in the registration statements becoming
effective, beyond dates specified in the Agreement. These penalties are usually
expressed as a fixed percentage, per month, of the original amount the Company
received on issuance of the debt or preferred stock, common shares, options or
warrants. The Company account for these penalties when it is probable that a
penalty will be incurred. At December 31, 2008 the Company has no registration
rights agreement requiring penalties to be recorded.




REVENUE
RECOGNITION





Revenue
is recognized when there is persuasive evidence of an arrangement, goods are
shipped and title passes, collection is probable, and the fee is fixed or
determinable.  The Company records deferred revenue when cash is
received in advance of the revenue recognition criteria being met.





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, 2008 and
2007, were $0 and $24,087, respectively, and are included in "General and
Administrative" in the consolidated statements of operations.





FAIR
VALUE OF FINANCIAL INSTRUMENTS





Financial
instruments, including cash, receivables, deposits, accounts payable, accrued
expenses 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





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.





35




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.





BASIC AND
DILUTED NET INCOME (LOSS) PER COMMON SHARE





Basic and
diluted 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 and diluted 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. If all outstanding options, warrants and convertible shares were
to be converted or exercised as of December 31, 2008, the shares outstanding
would be 245,883,363.





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 adopted SFAS No. 123(R) using the prospective transition method,
which requires the application of the accounting standard as of January 1,
2006, the first day of its year ended December 31, 2006. In accordance with
this transition method, the Company’s consolidated financial statements for
prior periods have not been restated to reflect, and do not include the impact
of, SFAS No. 123(R). The Company’s consolidated financial statements for
the year ended December 31, 2008 and 2007 reflect the impact of SFAS
No. 123(R). Upon adopting SFAS No. 123(R), for awards with service
conditions and graded-vesting, a one-time election was made to recognize
stock-based compensation expense on a straight-line basis over the requisite
service period for the entire award.




Stock-based
compensation expense recognized under SFAS No. 123(R) for the years ended
December 31, 2008 and 2007 were $712,501 and $1,667,107, respectively.





The
Company’s determination of fair value of share-based payment awards to employees
and directors on the date of grant uses the Black-Scholes model, which is
affected by the Company’s stock price as well as assumptions regarding a number
of highly complex and subjective variables. These variables include, but are not
limited to our expected stock price volatility over the term of the awards, and
actual and projected employee stock option exercise
behaviors.





36




The
Company accounts for stock option and warrant grants issued to non-employees for
goods and services using the guidance of SFAS No. 123 and Emerging Issues
Task Force (“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,” whereby the fair value of such option and warrant grants is
determined using the Black-Scholes option pricing model at the earlier of the
date at which the non-employee’s performance is completed or a performance
commitment is reached.





RECENTLY
ISSUED ACCOUNTING PRONOUNCEMENTS





SFAS No.
159,The Fair Value Option of Financial
Assets and Financial Liabilities (SFAS No. 159)




In
February 2007, the FASB issued SFAS No. 159. The Fair Value Option of Financial
Assets and Financial Liabilities (“SFAS No. 159”). SFAS No. 159
provides an option to report selected financial assets and financial liabilities
using fair value. The standard establishes required presentation and disclosures
to facilitate comparisons with companies that use different measurements for
similar assets and liabilities. The Company does not expect that the adoption of
SFAS No. 159 for financial assets and financial liabilities to have a
material impact on our consolidated financial statements in subsequent reporting
periods.





SFAS No. 141 (R),Business
Combinations (SFAS No. 141R)and SFAS
No. 160, Non-controlling
Interests in Consolidated Financial Statements (SFAS No.
160)




In
December 2007, the FASB issued SFAS No. 141R, Business Combinations, and SFAS
No. 160, Non-controlling Interests in Consolidated Financial Statements.
SFAS No. 141R requires an acquirer to measure the identifiable assets acquired,
the liabilities assumed, and any non-controlling interest in the acquiree at
their fair values on the acquisition date, with goodwill being the excess value
over the net identifiable assets acquired. SFAS No. 160 clarifies that a
non-controlling interest in a subsidiary should be reported as equity in the
consolidated financial statement. The calculation of earnings per share will
continue to be based on income amounts attributable to the parent. SFAS
No. 141R and SFAS No. 160 are effective for financial statements
issued for fiscal years beginning after December 15, 2008. Early adoption is
prohibited. The Company does not expect that the adoption of SFAS 141R or SFAS
No. 160 to have a material impact on our financial condition and results of
operations, although its effects on future periods will depend on the nature and
significance of business combinations subject to this statement.





SFAS
No. 161,Disclosures about
Derivative Instruments and Hedging Activities (SFAS No. 161)





In March
2008, the FASB issued FASB Statement No. 161, “Disclosures about Derivative
Instruments and Hedging Activities”. The new standard is intended to improve
financial reporting about derivative instruments and hedging activities by
requiring enhanced disclosures to enable investors to better understand their
effects on an entity’s financial position, financial performance, and cash
flows. SFAS 161 is effective for fiscal years and interim periods beginning
after November 15, 2008. The Company does not expect the adoption of SFAS 161 to
have a material impact on the presentation of our annual and interim period
disclosures.





Management
does not believe that there are any recently-issued, but not yet effective
accounting pronouncements, which could have a material effect on the
accompanying condensed consolidated financial statements.





NOTE
2. DISCONTINUED OPERATIONS





The
Company decided to close several of its operations and has presented certain
activities as discontinued operations as of and for the years ended December 31,
2008 and 2007.





37




Telecom





The
Company decided to wind down its telecom operations, including those of its
subsidiary, Centerline Communications LLC. It did not have sufficient working
capital to make its telecom operations profitable. The Company decided that any
capital should be directed towards the Company’s other programs and that it
should collect Centerline’s outstanding receivables and sell its
assets





GlobeTel
Wireless Corp.





During
the first quarter of 2007, the president of GlobeTel Wireless, Ulrich Altvater,
became a consultant to the Company to provide many of the services that were
provided under the auspices of GlobeTel Wireless. The Company believed at the
time that this would be a more cost efficient manner of running the
business.  However, in May of 2007 the Company terminated the contract
with Altvater.  In the second quarter of 2007, the Company decided to
shut down the subsidiary and concentrate its efforts solely on the development
and sale of Lighter than Air Unmanned Aerial Vehicles (LTA UAV’s).





In March
2007, the Company received $242,500 in exchange for a note payable that was
secured by common stock of the Company.  The proceeds were used by
GlobeTel Wireless as a further investment in a joint venture that was abandoned
in 2007. The Company received a Notice of Acquisition of Collateral which
allowed the note holder to satisfy the note payable with the pledged common
shares.





During
2007, the Company discontinued two components of its business which constituted
discontinued operations – Telecom and GlobeTel Wireless Corp.  The
loss on the Company’s consolidated statements of operations for the years ended
December 31, 2008 and 2007 is summarized as follows:





Telecom
                  
                  2008
                  
                  
                  2007Loss
      from discontinued operations
                  
                  $
                  (197
                  )
                  
                  $
                  (781,455
                  )GlobeTel
      WirelessLoss
      from discontinued operations
                  
                  
                  —
                  
                  
                  
                  (1,137,351
                  )Total
      loss from discontinued operations
                  
                  $
                  (197
                  )
                  
                  $
                  (1,918,806
                  )





The
Company incurred the following losses from discontinued operations for the years
ended December 31, 2008 and 2007:





2008
                
                Telecom
                
                
                GlobeTel Wireless
                
                
                TotalGeneral
      and administrative
                
                $
                (197
                )
                
                $
                —
                
                
                $
                (197
                )Gain/loss
      from discontinued operations
                
                $
                (197
                )
                
                $
                —
                
                
                $
                (197
                )





2007
                
                Telecom
                
                
                GlobeTel Wireless
                
                
                TotalRevenue
                
                $
                4,849
                
                
                $
                —
                
                
                $
                4,849Cost
      of sales
                
                
                (11,676
                )
                
                
                —
                
                
                
                (11,676
                )Gross
      margin (loss)
                
                
                (6,827
                )
                
                
                —
                
                
                
                (6,827
                )Payroll
      and related taxes
                
                
                (18,935
                )
                
                
                (91,865
                )
                
                
                (110,800
                )General
      and administrative
                
                
                (84,385
                )
                
                
                (798,736
                )
                
                
                (883,121
                )Depreciation
      and amortization
                
                
                (654,672
                )
                
                
                —
                
                
                
                (654,672
                )Consulting
      and professional fees
                
                
                (16,636
                )
                
                
                —
                
                
                
                (16,636
                )Loss
      on investment
                
                
                —
                
                
                
                (246,750
                )
                
                
                (246,750
                )Loss
      from discontinued operations
                
                $
                (781,455
                )
                
                $
                (1,137,351
                )
                
                $
                (1,918,806
                )





38





The
Company had the following assets and liabilities from its discontinued
operations on its consolidated balance sheet as of December 31, 2008 and
2007:





2008
                
                Telecom
                
                
                GlobeTel Wireless
                
                
                TotalCash
                
                $
                6,406
                
                
                $
                —
                
                
                $
                6,406Total
      assets
                
                
                6,406
                
                
                
                —
                
                
                
                6,406Accounts
      payable
                
                
                140,116
                
                
                
                1,216,208
                
                
                
                593,422Accrued
      liabilities
                
                
                9,605
                
                
                
                21,477
                
                
                
                793,985Total
      current liabilities
                
                
                149,721
                
                
                
                1,237,685
                
                
                
                1,387,406Net
      liabilities of discontinued operations
                
                $
                143,315
                
                
                $
                1,237,685
                
                
                $
                1,381,000




2007
                
                Telecom
                
                
                GlobeTel Wireless
                
                
                TotalCash
                
                $
                6,942
                
                
                $
                —
                
                
                $
                6,942Accounts
      receivable
                
                
                11,736
                
                
                
                —
                
                
                
                11,736Total
      assets
                
                
                18,678
                
                
                
                —
                
                
                
                18,678Accounts
      payable
                
                
                140,091
                
                
                
                1,216,208
                
                
                
                1,356,299Accrued
      liabilities
                
                
                9,605
                
                
                
                21,477
                
                
                
                31,082Total
      current liabilities
                
                
                149,696
                
                
                
                1,237,685
                
                
                
                1,387,381Net
      liabilities of discontinued operations
                
                $
                131,018
                
                
                $
                1,237,685
                
                
                $
                1,368,703





NOTE
3. TAO TECHNOLOGIES TRANSACTIONS




In
November 2007, the Company and TAO-Technologies, in cooperation with the
University of Stuttgart in Germany, entered into a Technical Cooperation and
License Agreement wherein the Company acquired the exclusive license rights to
certain TAO remote airship technologies and patents.   TAO
granted to Sanswire an exclusive license for the territories of the US, Canada,
Mexico and Chile for the marketing and distribution of airships based upon the
technologies patented and developed by TAO. TAO was also to provide testing and
engineering support for the development of airships to meet the criteria
required by Sanswire customers. Sanswire was obligated to provide TAO with
engineering orders of at least $1,000,000 per year and certain cash and stock
payments on a quarterly basis.
 
 On June
3, 2008 Sanswire and TAO restructured
the November 2007 agreement and entered
into a new agreement to form a 50/50 US based joint venture to place, among
other things, the license rights to the TAO intellectual property in US, Canada,
and Mexico into the US based JV company to be called Sanswire-TAO. The
intellectual property includes, but is not limited to an existing patent as well
as any updates to that patent. This integration of Sanswire and Stuttgart,
Germany-based TAO Technologies Gmbh took place to create various strategic
advantages for both companies. Each group entered the relationship with
synergistic, yet very distinct core competencies. Sanswire’s business
development, its inroads into the U.S. Government review process as well as
inroads into overseas markets and other marketing resources complement TAO’s
vast airship product research and development ability. In addition the joint
venture has an exclusive agreement with TAO that may require additional payments
in the future.




39
 
  During
2007, the Company made payments totaling $391,000, consisting of $130,000 in
cash and 1.86 million shares valued at $261,000 as part of its November 2007
agreement with TAO Technologies GmbH and Professor Bernd
Kroplin.  These payments were initially part of the Technical
Cooperation and License Agreements wherein the Company acquired the exclusive
license rights to certain TAO remote airship technologies and
patents.  However in June 2008 the Company restructured its November
2007 agreement with TAO
Technologies GmbH and Professor Bernd Kroplin. The new agreement called for the
establishment of a new US-based joint venture company to be called Sanswire-TAO
that was to be owned equally by TAO and Sanswire Corp. Additionally,
Sanswire-TAO would register the patents and the intellectual property of TAO
Technologies and Kroplin in the United States for the exclusive use of
Sanswire-TAO.  Further, the $391,000 paid during 2007 was applied as
payment towards the new agreement and thus the Company has previously classified
these payments as a long term deposit as it resulted in a long term investment.
On June 3, 2008, the Company treated the transaction as the investment in a
joint venture and booked a $3,229,000 asset related to the
investment.   After application of the 2007 deposit of $391,000
and the 2008 payments of $703,000, the balance of $2,135,000 due for the
investment is accrued in accrued expenses as of December 31, 2008 as shown in
Note 4 below.  Finally, the investment will be subject to impairment
in the future.





NOTE
4. ACCRUED EXPENSES AND OTHER LIABILITIES





Accrued
expenses and other liabilities consisted of the following:




2008
                              
                              
                              2007Payroll
      Liabilities
                              
                              $
                              1,235,264
                              
                              
                              $
                              813,787Professional
      Fees
                              
                              
                              118,946
                              
                              
                              
                              253,568Due
      for Investment in Joint Venture
                              
                              
                              2,135,000
                              
                              
                              
                              —ACCRUED
      EXPENSES AND OTHER LIABILITIES
                              
                              $
                              3,489,210
                              
                              
                              $
                              1,067,355




NOTE
5. NOTES AND CONVERTIBLE NOTES PAYABLE




2008
                          
                          
                          2007(A)
      Notes payable
                          
                          $
                          5,997,030
                          
                          
                          $
                          6,139,357(B)
      Convertible notes payable, net of unamortized discount of $0 and
      $454,531
                          
                          
                          80,000
                          
                          
                          
                          825,469(C)
      Convertible promissory notes, net of unamortized discount of $134,423 and
      $802,833
                          
                          
                          2,016,913
                          
                          
                          
                          336,036Total
                          
                          
                          8,093,943
                          
                          
                          
                          7,300,862Accrued
      interest
                          
                          
                          1,170,789
                          
                          
                          
                          755,358NOTES
      AND CONVERTIBLE NOTES PAYABLE
                          
                          $
                          9,264,732
                          
                          
                          $
                          8,056,220


(A) NOTES
PAYABLE





Notes
payable are made up of two separate notes.





From
February 2007 to October 2007, the Company received a total of $641,812 from the
first note. During January 2008, the Company received a total of $7,673. As of
December 31, 2008 a balance of $4,997,130 remains through an unsecured
promissory note with no formal terms of repayment.  The Company has accrued
interest at a rate of 7% per annum, which totals $826,784 as of December 31,
2008.





During
2007 and 2008, the Company received no additional funding related to the second
note. In January 2008, the note holder converted $150,000 of the loans to
1,428,571 shares of common stock. As of December 31, 2008 a balance of $999,900
remains through an unsecured promissory note with no formal terms of repayment.
 The Company has accrued interest at a rate of 7% per annum, which totals
$162,151 as of December 31, 2008.





As of
December 31, 2008 and 2007, the aggregate amounts outstanding under these
independent notes were $5,997,030 and $6,139,357.





40




(B)
CONVERTIBLE NOTES PAYABLE





September 2006
Notes


On
September 6, 2006, the Company entered into subscription agreements with several
investors whereby these investors bought a total $1,280,000 in two year, 7%
convertible notes and were issued Class A and Class B Warrants). Net proceeds of
$1,124,080 were received, after deducting costs and expenses related to the
transaction.





The
Company determined that the fair value of the conversion feature was $624,869
and the fair value of the warrants was $655,131 based upon the relative value of
the Black Scholes valuation of the warrants and the underlying debt
amount.  For the Black Scholes calculation, the Company assumed no
dividend yield, a risk free interest rate of 4.5%, expected volatility of 99.63%
and an expected term of the warrants of 5 years.   The initial
calculated fair value of warrants and the beneficial conversion of the notes of
$1,280,000 was reflected by the Company as a valuation discount and offset to
the carrying value of the Notes, and is being amortized by the effective
interest method over the term of the Notes. For the year ended December 31,
2007, the Company amortized $397,872 of the valuation discount, which is
reflected as financing costs in the Company’s consolidated statements of
operations.





In
January 2007, the Company executed several Certificates of Adjustments for the
previously issued Notes. The Notes previously had Exercise Prices ranging from
$0.33 to $.39 and with the execution of the adjustments; the Exercise Prices
were then modified to $0.196. The aforementioned substantial modification of
debt is accounted for under EITF 96-19, however EITF 06-6 deemed the
modification an extinguishment of debt, with a resultant gain of $254,200
recorded upon execution. On May 1, 2007, the
Company executed several Certificates of Adjustments for the previously issued
Warrants. The Warrants previously had Exercise Prices ranging from $0.75 to
$1.00 and with the execution of the adjustments; the Exercise Prices were then
modified to $0.196. The Company recognized a $140,487 loss from the increase in
fair value from the modification of warrants.





Additionally,
as the Company was unable to register the shares underlying the debentures and
warrants due to it restating its financial statements, the Company had to pay
liquidated damages to the debenture holders. In 2007, the Company agreed to and
issued 662,951 shares valued at $104,400 to pay liquidated damages through
March 31, 2007.





Also in
December 2007, the Company separately entered into a forbearance agreement with
some of the debt holders. This agreement changed their conversion to the lesser
of $.20 or 70% of the volume weighted average price for the 10 days prior to
conversion. The agreement also limits some of the investors from engaging in
short sales on the stock and places a volume limitation on
sales.   The agreement becomes effective January 16, 2008, and as
such, the Company reviewed the transaction for possible derivative accounting
requirements pursuant to EITF 00-19.  The Company used the
Black-Scholes option pricing model to evaluate the fair value of the embedded
derivative. On January 16, 2008, the Company allocated the fair value of the
embedded derivative to derivatives expense in the aggregate amount of $184,081.
The embedded derivative was subsequently adjusted to be recorded at fair market
value at each period ending date and a total change of $184,081 recorded to
derivatives income (expense).  During 4th quarter
2008, the outstanding balance of these notes and interest was converted into
approximately 7.65 million shares.





In
January 2008, the Company issued certificates of adjustment for certain
convertible debentures and warrants issued pursuant to the 2006 financing to
$.105 per share.  The Notes previously had Exercise Prices of
$0.196.  The aforementioned substantial modification of debt is
accounted for under EITF 96-19, however EITF 06-6 deemed the modification an
extinguishment of debt, with a resultant loss of $293,817 recorded upon
execution, which was recorded in January 2008.





During
2008, $1,200,000 of principal and was converted into approximately 23.4 million
shares of Company common stock.





41




(C)
CONVERTIBLE PROMISSORY NOTES





2006 Convertible Promissory
Notes


In
December 2006, the Company entered into financing agreements for convertible
promissory notes payable totaling $250,000.  As of December 31, 2006,
the Company received $206,000 with the balance of $44,000 being received in
January 2007. Upon receipt of the full 250,000, the notes become convertible
into common stock of the Company at $.196 per share.  The note, which
is due two years from inception, accrues interest at a rate of 7% per annum and
were issued Class A and Class B warrants (valued at $103,610 and $60,528,
respectively as described below). The Class A and B warrants are exercisable for
a purchase price of $.21 and $.315, respectively. The warrants have a 2 year
term.





The
Company entered into additional financing agreements on the same terms and
conditions as set forth above in March 2007 for a total of $400,000; in June for
$100,000; in June for $125,000 and in September for $175,000. They were also
issued Class A warrants (valued at $175,727, $33,706, $42,255 and $16,520,
respectively as described below) and Class B warrants (valued at $103,805,
$18,995, $23,771 and $5,899, respectively as described below).





The
Company determined that the total fair value of the conversion features was
$595,140 and the total fair value of the warrants was $617,860 based upon the
relative value of the Black Scholes valuation of the warrants and the underlying
debt amount.  For the Black Scholes calculation, the Company assumed
no dividend yield, a risk free interest rate of 4.5%, expected volatility
ranging from 58.68% to 105.47% and an expected term of the warrants of 5
years.  The initial calculated fair value of warrants and the
beneficial conversion of total of the notes of $1,138,869 were reflected by the
Company as a valuation discount and offset to the carrying value of the Notes,
and are being amortized by the effective interest method over the term of the
Notes. For the year ended December 31, 2007, the Company amortized $429,333 of
the valuation discount, which is reflected as financing costs in the Company’s
consolidated statements of operations.





In
November  2007, the Company entered into securities purchase
agreements to sell shares at $.105 per share for a total of $315,000, only a
portion of which was payable at the time of subscription with the remainder
payable upon the happening of certain corporate events with $163,000 received as
of December 31, 2007. This had the effect of resetting the conversion provisions
on the previously issued convertible notes to $.105 per share. The agreements
were revised in the first quarter of 2008 to allow a larger percentage of the
subscribed funds to become available to the Company. Thus, a portion of the
subscription amount was received in the first quarter of 2008.





In
January 2008, the Company issued certificates of adjustment for certain
convertible debentures and warrants issued pursuant to the 2006 and 2007
financings to $.105 per share.  The Notes previously had Exercise
Prices of $0.196.  The aforementioned substantial modification of debt
is accounted for under EITF 96-19; however EITF 06-6 deemed the modification an
extinguishment of debt, with a resultant loss of $783,667 recorded upon
execution, which was recorded in January 2008.





During
2008 the Company entered into an additional $547,000 in financing agreements on
the same terms and conditions as set forth above.  They were also
issued Class A warrants (valued at $79,296 as described below) and Class B
warrants (valued at $43,287 as described below).





The
Company determined that the total fair value of the warrants was $122,583 based
upon the relative value of the Black Scholes valuation of the warrants and the
underlying debt amount.  For the Black Scholes calculation, the
Company assumed no dividend yield, a risk free interest rate ranging from 1.58%
to 2.76%, expected volatility ranging from 114.16% to 132.31% and an expected
term of the warrants of 2 years.  The initial calculated fair value of
warrants of $122,583 was reflected by the Company as a valuation discount and
offset to the carrying value of the Notes, and are being amortized by the
effective interest method over the term of the Notes. For the year ended
December 31, 2008, the Company amortized $44,454 of the valuation discount,
which is reflected as financing costs in the Company’s consolidated statements
of operations.





During
2008 and 2007, $52,000 and $94,130 of principal and interest were converted into
543,632 and 896,480 shares, respectively, of Company common
stock.





42





2007 Convertible Promissory
Note


In
December 2007, the Company entered into a financing agreement for a convertible
promissory note payable totaling $20,000.  The note is convertible
into common stock of the Company at $.196 per share.  The note, which
is due two years from inception, accrues interest at a rate of 7% per annum and
was issued Class A and Class B warrants (valued at $7,916 and $3,921,
respectively as described below). The Class A and B warrants are exercisable for
a purchase price of $.21 and $.315, respectively. The warrants have a 2 year
term.





The
Company determined that the fair value of the conversion features was $8,163 and
the fair value of the warrants was $11,837 based upon the relative value of the
Black Scholes valuation of the warrants and the underlying debt
amount.  For the Black Scholes calculation, the Company assumed no
dividend yield, a risk free interest rate of 4.5%, expected volatility of 58.68%
and an expected term of the warrants of 5 years.   The initial
calculated fair value of warrants and the beneficial conversion of the notes of
$20,000 was reflected by the Company as a valuation discount and offset to the
carrying value of the Note, and is being amortized by the effective interest
method over the term of the Note. For the year ended December 31, 2007, the
Company amortized $833 of the valuation discount, which is reflected as
financing costs in the Company’s consolidated statements of
operations.





In
January 2008, the Company issued certificates of adjustment for certain
convertible debentures and warrants issued pursuant to the 2007 financings to
$.105 per share.  The Notes previously had Exercise Prices of
$0.196.  The aforementioned substantial modification of debt is
accounted for under EITF 96-19; however EITF 06-6 deemed the modification an
extinguishment of debt, with a resultant loss of $19,167 recorded upon
execution, which was recorded in January 2008.





During
2008 the Company entered into an additional $80,000 in financing agreements on
the same terms and conditions as set forth above.  They were also
issued Class A warrants (valued at $17,138 as described below) and Class B
warrants (valued at $9,469 as described below).





The
Company determined that the total fair value of the warrants was $26,607 based
upon the relative value of the Black Scholes valuation of the warrants and the
underlying debt amount.  For the Black Scholes calculation, the
Company assumed no dividend yield, a risk free interest rate ranging from 1.53%
to 1.65%, expected volatility ranging of 125.19% and an expected term of the
warrants of 2 years.  The initial calculated fair value of warrants of
$26,607 was reflected by the Company as a valuation discount and offset to the
carrying value of the Notes, and are being amortized by the effective interest
method over the term of the Notes. For the year ended December 31, 2008, the
Company amortized $11,086 of the valuation discount, which is reflected as
financing costs in the Company’s consolidated statements of
operations.





During
2008 and 2007, no principal or interest has been converted.





2008 Convertible Promissory
Notes


During
2008, the Company entered into new financing agreements for convertible
promissory notes payable totaling $97,606.  The notes are convertible
into common stock of the Company at $.105 per share.  The notes, which
are due two years from inception, accrues interest at a rate of 7% per annum and
were issued Class A and Class B warrants (valued at $20,485 and $11,620,
respectively as described below). The Class A and B warrants are exercisable for
a purchase price of $.21 and $.315, respectively. The warrants have a 2 year
term.





The
Company determined that the fair value of the conversion features was $8,469 and
the fair value of the warrants was $32,465 based upon the relative value of the
Black Scholes valuation of the warrants and the underlying debt
amount.  For the Black Scholes calculation, the Company assumed no
dividend yield, a risk free interest rate ranging from 1.91% to 2.3%, expected
volatility ranging from 114.16% to 142.06% and an expected term of the warrants
of 2 years.  The initial calculated fair value of warrants and the
beneficial conversion of the notes of $40,934 were reflected by the Company as a
valuation discount and offset to the carrying value of the Notes, and are being
amortized by the effective interest method over the term of the Note. For the
year ended December 31, 2008, the Company amortized $16,024 of the valuation
discount, which is reflected as financing costs in the Company’s consolidated
statements of operations.


43




During
2008, no principal or interest has been converted into the Company’s common
stock however $25,139 was repaid.





2008 Convertible Promissory
Note


During
2008, the Company entered into a new financing agreement for a convertible
promissory note payable totaling $25,000.  The note is convertible
into common stock of the Company at $.105 per share.  The note, which
is due two years from inception, accrues interest at a rate of 7% per annum and
was issued Class A and Class B warrants (valued at $3,466 and $1,948,
respectively as described below). The Class A and B warrants are exercisable for
a purchase price of $.21 and $.315, respectively. The warrants have a 2 year
term.





The
Company determined that the fair value of the warrants was $5,414 based upon the
relative value of the Black Scholes valuation of the warrants and the underlying
debt amount.  For the Black Scholes calculation, the Company assumed
no dividend yield, a risk free interest rate of 1.6%, expected volatility
ranging of 140.25% and an expected term of the warrants of 2
years.   The initial calculated fair value of warrants of $5,414
was reflected by the Company as a valuation discount and offset to the carrying
value of the Note, and is being amortized by the effective interest method over
the term of the Note. For the year ended December 31, 2008, the Company
amortized $677 of the valuation discount, which is reflected as financing costs
in the Company’s consolidated statements of operations.





During
2008, no principal or interest has been converted however during 2009, $25,000
in principal and interest has been converted into 238,096 shares of the
Company’s common stock.





2008 Convertible Promissory
Notes


In
September 2008, the Company entered into a new financing agreement for
convertible promissory note payable totaling $50,000.  The note is
convertible into common stock of the Company at $.105 per share.  The
note, which is due two years from inception, accrues interest at a rate of 7%
per annum and was issued Class A and Class B warrants (valued at $4,677 and
$2,597, respectively as described below). The Class A and B warrants are
exercisable for a purchase price of $.21 and $.315, respectively. The warrants
have a 2 year term.





The
Company determined that the fair value of the warrants was $7,274 based upon the
relative value of the Black Scholes valuation of the warrants and the underlying
debt amount.  For the Black Scholes calculation, the Company assumed
no dividend yield, a risk free interest rate ranging of 2.16%, expected
volatility ranging of 142.06% and an expected term of the warrants of 2
years.   The initial calculated fair value of warrants of $7,274
was reflected by the Company as a valuation discount and offset to the carrying
value of the Note, and is being amortized by the effective interest method over
the term of the Note.  On October 6, 2008 $50,000 of principal and
interest were converted into 476,190 shares of the Company’s common
stock.  As such, the Company amortized the full value of the discount
of $7,274, which is reflected as financing costs in the Company’s consolidated
statements of operations.





In
December 2008, the Company entered into a new financing agreement for a new
convertible promissory note payable totaling $50,000.  The note is
convertible into common stock of the Company at a price to be determined in the
future.  The note, which is due on January 31, 2009, accrues interest
at a rate of 5% per annum.  The note is secured by 1,000,000 shares of
the Company’s common stock owned by the Company’s CEO.  In February
2009, the Company issued 250,000 shares, valued at $9,500, as a penalty to
extend the maturity to an unspecified date.





2008 Convertible Promissory
Notes


From
October to December 2008, the Company entered into new financing agreements for
convertible promissory notes payable totaling $435,000.  The notes are
convertible into common stock of the Company at $.105 per share.  The
notes, which are due two years from inception, accrues interest at a rate of 7%
per annum and was issued Class A and Class B warrants (valued at $54,758 and
$30,688, respectively as described below). The Class A and B warrants are
exercisable for a purchase price of $.21 and $.315, respectively. The warrants
have a 2 year term.


44





The
Company determined that the fair value of the warrants was $85,445 based upon
the relative value of the Black Scholes valuation of the warrants and the
underlying debt amount.  For the Black Scholes calculation, the
Company assumed no dividend yield, a risk free interest rate ranging from .75%
to 1.62%, expected volatility ranging from 138.92% to 142.25% and an expected
term of the warrants of 2 years.  The initial calculated fair value of
warrants of $85,445 was reflected by the Company as a valuation discount and
offset to the carrying value of the Note, and is being amortized by the
effective interest method over the term of the Note. For the year ended December
31, 2008, the Company amortized $38,083 of the valuation discount, which is
reflected as financing costs in the Company’s consolidated statements of
operations.





During
2008, $145,000 in principal and interest has been converted into 1,369,895 of
the Company’s common stock.





NOTE
6. AGREEMENTS





AGREEMENTS





Several
agreements, letters of intent, and memorandums of understanding regarding the
Sanswire project were entered into during 2008 and 2007 and through the date of
this report, none of which require the recording of any assets, liabilities,
revenues or expenses.





NOTE
7. COMMITMENTS AND CONTINGENCIES





Securities and Exchange
Commission





On
September 28, 2006, the Company received a formal order of investigation from
the SEC. The formal order only named the Company and was not specific to any
particular allegations. Through the use of subpoenas, the SEC has requested
documentation from certain officers and directors of the Company. In subsequent
subpoenas, the SEC has asked for additional documents and
information.





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





On May 2,
2008, the Securities and Exchange Commission (“SEC”) filed a lawsuit in the
United States District Court for the Southern District of Florida against
GlobeTel Communications Corp. (the “Company”) and three former officers of the
Company, Timothy J. Huff, Thomas Y. Jimenez and Lawrence E. Lynch. The SEC
alleges, among other things, that the Company recorded $119 million in revenue
on the basis of fraudulent invoices created by Joseph Monterosso and Luis
Vargas, two individuals formerly employed by the Company who were in charge of
its wholesale telecommunications business.





The SEC
alleges that the Company violated Sections 5(a), 5(c), and 17(a) of the
Securities Act of 1933, as amended, Sections 10(b), 13(a), 13(b)(2)(A) and
13(b)(2)(B) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), and Rules 10b-5, 12b-20, 13a-1, 13a-11 and 13a-13 under the Exchange Act.
The SEC seeks as relief a permanent injunction, civil penalties, and
disgorgement with prejudgment interest. The Commission subsequently consolidated
this action with another pending action involving former officers of the
Company. The Commission has also moved to amend its complaint against the
Company to include additional allegations of wrongdoing beginning in 2002, which
motion to amend is still pending with the Court.  The parties are
currently engaged in discovery.  The Company has been vigorously
defending itself in this action.


45





Joseph
Monterosso





In
October 2007 the Company filed a lawsuit in the Circuit Court for Broward
County, Florida against Joseph J. Monterosso alleging Libel, Slander and
Defamation, Tortuous Interference, Violations of FS § 836.05 (Threats
Extortion)  and violations of FS §517 (Securities Fraud). Mr.
Monterosso has not yet been served with the complaint pending additional
information arising from the SEC lawsuit.





Wachovia v.
GlobeTel





In
connection with the operations of Globetel Wireless Europe GmbH and the
acquisition of Altvater GmbH, the Company guaranteed a letter of credit in the
amount of $600,000. Upon Globetel Wireless Europe GmbH ceasing operations, the
letter of credit was drawn upon. The letter of credit was not collateralized. In
September 2007, Wachovia filed a lawsuit in Broward County in an attempt to
recover the amount through arbitration with the American Arbitration
Association. On June 2, 2008, the American Arbitration Association awarded
Wachovia $762,902





Richard Stevens v.
GlobeTel





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





In
February 2008, the Company and the Plaintiff reached a settlement in principle
that has been filed with the Court for approval. Under the terms of the proposed
settlement agreement in the class action, the Company’s D&O insurance
carrier will make a cash payment to the class of $2,300,000, less up to $100,000
for potential counsel fees and expenses. All claims in the class action will be
dismissed with prejudice. The US District Court for the Southern District of
Florida has approved the settlements reached in its pending securities class
action and a shareholder derivative action on February 4, 2008.





Derivative
Action





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





Mitchell Siegel v.
GlobeTel





On
February 2, 2007, GlobeTel was sued in the Circuit Court for Broward County,
Florida entitled Mitchell Siegel v. GlobeTel Communications Corp. , Case no.
0702456 (“the Siegel Lawsuit”). In this action, Siegel sued the Company for
breach of contract in regards to a Key Executive Employment
Agreement.  On February 15, 2008, both parties entered into a
settlement agreement whereas Mr. Siegel would receive $175,000 worth of stock,
payable over 12 months, and 50% of the gross proceeds, up to a total amount of
$300,000, received from an October 2006 agreement. During 2008 the Company paid
$131,250 in the Company’s common stock associated with the settlement
agreement.  During 2009 the Company paid an additional $29,167 in the
Company’s common stock.


46




Former
Consultants





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. The Company was entered into
the action as ADGI was the predecessor of the Company. The suit also requests an
accounting for the sales generated by the consultants and attorneys fees and
costs for the action.





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





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





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





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





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





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





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





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


47





Trimax
Wireless





On July
3, 2007 the Company filed suit against its former employee Ulrich Altvater and
his company Trimax Wireless seeking the return of certain equipment held at the
former GlobeTel Wireless offices and for the return of $175,000 lent to Altvater
by the Company. The replevin action against Trimax was dismissed on the basis of
venue and the Company intends to refile the suit with regard to Trimax in
Collier County, Florida.





On July
12, 2007, the Company terminated its agreement with Mr. Altvater and his
company, Trimax Wireless, Inc.





In August
2007, Altvater and Trimax filed suit against the Company alleging, defamation,
conversion, breach of contract and seeking injunctive relief. The Company
successfully moved to have the two cases consolidated and has filed a Motion to
Dismiss this suit.  The Company intends to vigorously defend this
suit, but no assurance can be given about the outcome of the
litigation.





American
Express





American
Express Travel Related Services Company, Inc. has filed a lawsuit against the
Company and Sanswire Networks LLC (CASE NO: CACE 08-013239, Broward County
Florida), seeking to recover a total of $394,919 for unpaid charges on the
Companies’ corporate purchasing account. On October 3, 2008, American Express
received a final judgment for $404,113.  This liability was previously
recorded in the Company’s accounts payable as incurred.





LEASES
AND RENTS




Sanswire’s
corporate offices are now located at 101 NE 3 rd Ave.,
Suite 1500, Fort Lauderdale, FL 33301. Base rent is $575 per month plus the cost
of services used by Sanswire. The lease is for a period of 6 months. The lease
is for a period of 6 months and terminates on September 30,
2009.   We believe our facilities are adequate for our current
and near-term needs.





The
Company previously leased office facilities at 9050 Pines Blvd., Suite 110,
Pembroke Pines, Florida 33024, as of April 1, 2004. The Company vacated the
premises in March 2006, having turned over the space to Gotham Financial as part
of the sale of the Stored Value assets to Gotham. However, there was unpaid rent
due on both the first and second floor suites. In August 2007, the landlord
received a judgment in the amount of $206,730 of which $115,693 was accrued for
in 2006 as it relates to 2006 expenses. The balance was accrued in
2007.




Until
September 2007, the Company 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.





As of
October 2007, Sanswire no longer occupies a hangar at Palmdale Regional Airport,
the monthly cost of this space was $20,847. This facility was adjacent to the
United States Air Force’s Plant 42 and Edwards Air Force Base. Sanswire
constructed and tested Stratellite and Sky Sat prototypes at the facility. The
hangar also included administrative office space. Sanswire is indebted to Los
Angeles World Airports, the lessor of the hangar, in the amount of
$161,761.





Rent
expense for 2008 and 2007 were $42,431 and $285,033,
respectively.


48





NOTE
8. INCOME TAXES





Deferred
income taxes and benefits for 2008 and 2007 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:




2007
                            
                            
                            Current
                              Period
                              Changes
                            
                            
                            2008Deferred
      tax assets:Net
      operating loss carryforwards
                            
                            $
                            14,849,395
                            
                            
                            $
                            815,792
                            
                            
                            $
                            15,665,18714,849,395
                            
                            
                            
                            815,792
                            
                            
                            
                            15,665,187Valuation
      allowance
                            
                            
                            (14,849,395
                            )
                            
                            
                            (815,792
                            )
                            
                            
                            (15,665,187
                            )Net
      deferred tax asset
                            
                            $
                            —
                            
                            
                            $
                            —
                            
                            
                            $
                            —




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





2008
                
                
                2007Income
      tax benefit computed at federal statutory rate
                
                $
                (815,792
                )
                
                $
                (1,740,822
                )Losses
      not benefited
                
                
                815,792
                
                
                
                1,740,822$
                —
                
                
                $
                —




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 2008, 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 $81,429,083,
which expire at various dates through 2021.





NOTE
9. COMMON STOCK TRANSACTIONS





During
the year ended December 31, 2008, the Company issued the following shares of
common stock:





SHARES
                      
                      CONSIDERATION
                      
                      VALUATION2,700,701
                      
                      Settlement
      of Debt
                      
                      $
                      99,6741,222,222
                      
                      Services
      - Performance Bonus
                      
                      
                      110,0006,047,222
                      
                      Consulting
      Services
                      
                      
                      374,50230,465,195
                      
                      Converted
      Notes Payable and Accrued Interest
                      
                      
                      1,978,8386,831,778
                      
                      Stock
      for Debt
                      
                      
                      367,9201,500,000
                      
                      Services
      - Performance Bonus
                      
                      
                      52,5002,680,000
                      
                      Stock
      for Joint Venture
                      
                      
                      268,0002,000,000
                      
                      Services
      - Performance Bonus
                      
                      
                      78,0001,500,000
                      
                      Services
      - Performance Bonus
                      
                      
                      97,500


49





During
the year ended December 31, 2007, the Company issued the following shares of
common stock:





SHARES
                    
                    CONSIDERATION
                    
                    VALUATION5,584,932
                    
                    Settlement
      of Debts
                    
                    $
                    5,955,565770,870
                    
                    Services
      - Performance Bonus
                    
                    
                    300,6393,750,000
                    
                    Exercised
      Warrants
                    
                    
                    750,0002,521,037
                    
                    Services
      - Performance Bonus
                    
                    
                    614,592177,910
                    
                    Stock
      for Brokers Fees
                    
                    
                    16,0122,475,000
                    
                    Consulting
      Services
                    
                    
                    640,0002,261,956
                    
                    Converted
      Notes Payable and Accrued Interest
                    
                    
                    355,4441,864,286
                    
                    Deposit
      for Joint Venture
                    
                    
                    261,000880,103
                    
                    Stock
      for Directors Fees
                    
                    
                    95,864





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.


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.




In August
2008, the Company issued an additional 800,000 contingent shares to a vendor
that will be returned to the company when the amounts due the vendor are paid
the Company has accounted for them as forfeitable shares as they believe they
will be returned under the agreement in 2009 they are not considered outstanding
for Earnings per share purpose and the liability remains
recorded.





NOTE
10. STOCK OPTIONS AND WARRANTS





During
the year ended December 31, 2008, the Company issued the following fully vested
options to acquire Common stock:





Date Issued
                
                Shares
                
                Consideration
                
                Valuation
                
                Relationship1/18/2008
                
                
                3,444,444
                
                Employees’
      Bonus
                
                $
                228,029
                
                Non
      Executive Employees2/6/2008
                
                
                250,000
                
                Employees’
      Bonus
                
                $
                16,803
                
                Non
      Executive Employees




During
the year ended December 31, 2007, the Company issued the following fully vested
options to acquire Common stock:




Date Issued
                
                Shares
                
                Consideration
                
                Valuation
                
                Relationship3/19/2007
                
                
                500,000
                
                Employee
      Bonus
                
                $
                130,753
                
                Non
      Executive Employee3/28/2007
                
                
                2,000,000
                
                Officer
      Stock Option Grant
                
                $
                352,093
                
                Chief
      Operating Officer4/12/2007
                
                
                2,000,000
                
                Officer
      Stock Option Grant
                
                $
                347,676
                
                Chief
      Operating Officer4/13/2007
                
                
                958,000
                
                Employees’
      Bonus
                
                $
                167,670
                
                Non
      Executive Employees5/22/2007
                
                
                4,078,945
                
                Employee’s
      Bonus
                
                $
                504,470
                
                Executive
      Employees6/15/2007
                
                
                1,500,000
                
                Officer
      Severance/Bonus
                
                $
                266,296
                
                Chief
      Operating Officer8/20/2007
                
                
                55,555
                
                Employees’
      Bonus
                
                $
                5,408
                
                Non
      Executive Employee8/30/2007
                
                
                1,833,333
                
                Officer
      Severance/Bonus
                
                $
                116,236
                
                Former
      Chief Executive Officer10/18/2007
                
                
                750,000
                
                Employees’
      Bonus
                
                $
                32,389
                
                Non
      Executive Employee


50





See below
for more information regarding vesting term and exercise
prices.





The above
scheduled stock options were recorded at fair market value under SFAS 123R (see
Note 1 above). The fair value of the options at the time of issuance was
determined using the Black-Scholes option-pricing model with the following
assumptions:





Risk
      free interest rate
                    
                    
                    3 -
      4.50
                    %Expected
      life
                    
                    3
      yearsExpected
      volatility
                    
                    
                    65-112
                    %Expected
      dividend yield
                    
                    
                    0
                    %





As of
December 31, 2008, the exercise price of all options outstanding exceeds the
market price of the Company’s stock, and therefore there was no intrinsic
value.





STOCK
OPTION BONUS PLANS





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 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 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 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 2008 and 2007, unless otherwise discounted as noted
above, were exercisable based on the closing market price of the Company's
free-trading shares.





STOCK
OPTIONS





Employee
options vest according to the terms of the specific grant and expire from 3 to
5 years from date of grant. As of December 31, 2007, all options issued and
outstanding have fully vested and thus there was no deferred compensation, Stock
option activity for the years ended December 31, 2008 and 2007 was as
follows:





Number of Options
                  (in shares)
                
                
                Weighted Average
                  Exercise PriceOutstanding
      at December 31, 2006
                
                
                20,173,602
                
                
                $
                .894Options
      Granted
                
                
                13,675,833
                
                
                
                .265Options
      Forfeited
                
                
                (5,144,265
                )
                
                
                .864Outstanding
      at December 31, 2007
                
                
                28,705,170
                
                
                $
                .600Options
      Granted
                
                
                3,694,444
                
                
                
                .091Options
      Forfeited
                
                
                (10,916,862
                )
                
                
                1.619Options
      Cancelled
                
                
                (5,500,000
                )
                
                
                .317Outstanding
      at December 31, 2008
                
                
                15,982,752
                
                
                $
                .350


51





WARRANTS





On
September 6, 2006, the Company entered into subscription agreements with several
investors whereby these investors were issued Class A and Class B Warrants. The
investors received one Class A Warrant to purchase one share of common stock for
every two shares that the notes were convertible into on the closing date as
well as one Class B Warrant to purchase the identical number of
shares.





The Class
A Warrants are exercisable for a purchase price equal to 150% of the market
price on the day prior to closing and the Class B Warrants are exercisable for a
purchase price equal to 200% of the market price on the day prior to closing
which calculates to 3,602,190 warrants ranging from $.66 to $1.26. The Warrants
have a 5 year term.





On April
13, 2007, the Company agreed to reprice the exercise price of warrants
previously packaged with a previous Convertible Note financing from 2006 to $.20
per share, and increased the number of shares issuable upon exercise of such
warrants 1.5 times the original amount of warrants issued. In consideration of
the aforementioned one of the investors exercised their warrants which resulted
in the issuance of 2,250,000 additional warrants.





On May 1,
2007, the Company executed several Certificates of Adjustments for the
previously issued Warrants. The Warrants previously had Exercise Prices ranging
from $0.75 to $1.00 and with the execution of the adjustments; the Exercise
Prices were then modified to $0.196. The Company recognized a $140,487 loss from
the increase in fair value from the modification of warrants.  In
January 2008, the Company issued certificates of adjustment for certain
convertible debentures and warrants issued pursuant to the 2006 financing to
$.105 per share.  The Company does not anticipate any additional
charge related to this modification due to the new price being above market
price at the time of the modification.





In
December 2007, the Company entered into financing agreements for convertible
promissory notes payable whereby these investors were issued Class A and Class B
warrants. The Class A and B warrants are exercisable for a purchase price of
$.21 and $.315, respectively. The warrants have a 2 year term.





In
December 2008, the Company entered into financing agreements for convertible
promissory notes payable whereby these investors were issued Class A and Class B
warrants. The Class A and B warrants are exercisable for a purchase price of
$.21 and $.315, respectively. The warrants have a 2 year term.





The
following table summarizes certain information about the Company’s stock
warrants.





Warrants
                  Class A
                
                
                Warrants
                  Class B
                
                
                Weighted Average
                  Exercise PriceOutstanding
      at December 31, 2006
                
                
                3,736,701
                
                
                
                1,801,095
                
                
                $
                1.994Warrants
      Granted
                
                
                8,121,428
                
                
                
                3,914,285
                
                
                
                0.242Warrants
      Exercised
                
                
                (3,750,000
                )
                
                
                —
                
                
                
                0.200Outstanding
      at December 31, 2007
                
                
                8,108,129
                
                
                
                5,715,380
                
                
                $
                0.330Warrants
      Granted
                
                
                5,879,075
                
                
                
                3,919,383
                
                
                
                0.252Warrants
      Exercised
                
                
                —
                
                
                
                —
                
                
                
                —Outstanding
      at December 31, 2008
                
                
                13,987,204
                
                
                
                9,634,763
                
                
                $
                0.253





The fair
value of the warrants issued during 2007 was determined using the Black-Scholes
option-pricing model with the following assumptions:





Risk
      free interest rate
                  
                  
                  .75
      - 4.50
                  %Expected
      life
                  
                  2 -
      5 yearsExpected
      volatility
                  
                  
                  58
      - 142
                  %Expected
      dividend yield
                  
                  
                  0
                  %


52





NOTE
11. PREFERRED STOCK





As of the
date of this report the Company has no preferred shares issued and/or
outstanding.





NOTE
12. SUBSEQUENT EVENTS





On
February 17, 2009, the Company entered into subscription agreement with
accredited investors. The Company sold $140,000 of the Company’s 7% Convertible
Debentures, 3-year warrants to purchase a number of shares equal to 50% of the
number of shares issuable upon conversion of the debenture of the Company’s
common stock at an exercise price of $0.21, and three-year warrants to purchase
a number of shares equal to 50% of the number of shares issuable upon conversion
of the debenture shares of the Company’s common stock at an exercise price of
$0.315. The Debentures are convertible into shares of the Company’s common stock
at $.105 per share pursuant to the following terms. If after 90 days from the
date hereof the market price of the Company’s common shares during the 90 day
period has not closed at a bid price at or above $.12 per share for 3 or more
consecutive trading days. In such instance then the Investors’ price per share
shall be equal to the average closing bid price for the last 30 trading days
immediately prior to the 90th day
after the date of this addendum. Should the price of the common shares be $.105
or higher on the 90th day
after the date of this addendum, then the purchase price per share shall remain
at $.105 per share.  Should the Market Price of the shares be $.105 or
higher on the 90th day
after the date of this addendum, but less than $.125, then the Investor shall be
entitled to an amount of additional shares equal to 10% of the number of shares
to which the Investor is otherwise entitled.


53





ITEM 9
CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURES





ITEM 9A
(T) CONTROLS AND PROCEDURES





Evaluation
of Disclosure Controls and Procedures





As
required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), the Company carried out an evaluation under the
supervision and with the participation of Jonathan Leinwand, the Company’s Chief
Executive Officer and Principal Financial Officer (the “Reviewing Officer”), of
the effectiveness of the Company's disclosure controls and procedures as of
December 31, 2008. In designing and evaluating the Company's disclosure controls
and procedures, the Company and its management recognize that there are inherent
limitations to the effectiveness of any system of disclosure controls and
procedures, including the possibility of human error and the circumvention or
overriding of the controls and procedures. Accordingly, even effective
disclosure controls and procedures can only provide reasonable assurance of
achieving their desired control objectives. Additionally, in evaluating and
implementing possible controls and procedures, the Company's management was
required to apply its reasonable judgment. Furthermore, in the course of this
evaluation, management considered certain internal control areas, including
those discussed below, in which we have made and are continuing to make changes
to improve and enhance controls. Based upon the required evaluation, the
Reviewing Officer concluded that as of December 31, 2008, the Company's
disclosure controls and procedures were effective to ensure that information
required to be disclosed by the Company in the reports it files or submits under
the Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission's rules and forms,
except for the establishment of the audit committee as contemplated
below.




Material
Weaknesses
 
 The
Company currently does not have an audit committee.





Remediation
of Material Weaknesses





Material
weaknesses identified in prior years have been addressed. In the first phase of
the program, already completed as of September 30, 2007, we hired consultants
and accounting consultants to review our financial statements and prepare the
restatement of our financial statements.




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





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





a.  
Seeking to recruit board members independent of management;





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





c.
            Seeking
      outside review of acquisition
transactions





d.
            Establishment
      of an audit committee





e.
            Upon
      adequate funding, hiring additional staff leading to the segregation of
      duties to enable a better control
environment




Changes
in Internal Control Over Financial Reporting





Except as
set forth above, there have been no changes in our internal control over
financial reporting that occurred during the year ended December 31, 2008 that
have materially affected or are reasonably likely to materially affect our
internal control over financial reporting.


54





Management’s
Report on Internal Control over Financial Reporting





We are
responsible for establishing and maintaining adequate internal control over
financial reporting in accordance with Exchange Act Rule 13a-15. With the
participation of our chief executive officer and chief financial officer, our
management conducted an evaluation of the effectiveness of our internal control
over financial reporting as of December 31, 2008 based on the criteria
established in Internal Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on this evaluation,
management concluded that our internal control over financial reporting was
effective as of December 31, 2008, based on those criteria. A control system, no
matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Because
of the inherent limitations in all control systems, no evaluation of controls
can provide absolute assurance that all control issues and instances of fraud,
if any, within the Company have been detected.





This
annual report does not include an attestation report of the Company’s registered
accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by the Company’s registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission.





ITEM
9B. OTHER INFORMATION





BOARD
APPOINTMENTS AND RESIGNATIONS





On March
14, 2007, Michael Castellano and Patrick Heyn resigned as directors of the
Company. Mr. Castellano also served as chairman of the Audit
Committee.





On
September 7, 2007, Peter Khoury resigned as director of the Company. Mr. Khoury
also resigned as CEO.


55





PART
III




ITEM
10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE




As of
March 31, 2009 the officers and directors of the Corporation are:





Name
              
              Age
              
              Position
      with CompanyJonathan
      Leinwand
              
              38
              
              Chief
      Executive Officer, DirectorPrzemyslaw
      Kostro
              
              45
              
              Chairman
      of the Board





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





Jonathan
Leinwand





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





Przemyslaw L.
Kostro




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




(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 believe that all reports required under Section 16(a) of the Exchange Act
were made.





Code
of Ethics





We have
not adopted a code of ethics.





Audit
Committee Financial Expert





We do not
have an audit committee financial expert because the Company has been unable to
appoint such a qualified person during the period when the Company has been
restating its financial statements and becoming current with its financial
statements.


56




ITEM
11. EXECUTIVE COMPENSATION.





The
following table sets forth information regarding compensation paid to our
principal executive officer, principal financial officer, and our highest paid
executive officer, all of whose total annual salary and bonus for the years
ended December 31, 2008, and 2007.





Name & Principal
                                Position
                              
                              Year
                              
                              Salary ($)
                              
                              Bonus
                                ($)
                              
                              Stock
                                Awards
                                ($)
                              
                              Option
                                Awards
                                ($)
                              
                              Non-
                                Equity
                                Incentive
                                Plan
                                Compensation ($)
                              
                              Change in PensionValue and Non-Qualified DeferredCompensationEarnings ($)
                              
                              All OtherCompensation($)
                              
                              Total ($)Jonathan
      Leinwand,
                                CEO,
      Director
                              
                              
                              2008
                              
                              34,599
                              
                              
                              —
                              
                              55,000
                              
                              
                              —
                              
                              —
                              
                              
                              —
                              
                              48,205
                              
                              137,804Jonathan
      Leinwand, CEO,
                                Director
                              
                              
                              2007
                              
                              46,153
                              
                              
                              —
                              
                              240,000
                              
                              
                              —
                              
                              —
                              
                              
                              —
                              
                              —
                              
                              286,153





OUTSTANDING
EQUITY AWARDS




The
following table sets forth information with respect to the outstanding equity
awards of our principal executive officers and principal financial officer
during 2008, and each person who served as an executive officer of the Company
as of December 31, 2008:





OptionAwards
                  
                  StockAwardsName
                  
                  Number
                    of
                    Securities
                    Underlying
                    Unexercised
                    Options (#)
                    Exercisable
                  
                  
                  Number
                    of
                    Securities
                    Underlying
                    Unexercised
                    Options (#)
                    Unexercisable
                  
                  
                  Equity
                    Incentive
                    Plan Awards:
                    Number of
                    Securities
                    Underlying
                    Unexercised
                    Unearned
                    Options (#)
                  
                  
                  Option
                    Exercise
                    Price
                    ($)
                  
                  Option
                    Expiration
                    Date
                  
                  Number
                    of
                    Shares
                    or Units
                    of Stock
                    That
                    Have
                    Not
                    Vested
                    (#)
                  
                  
                  Market
                    Value of
                    Shares
                    or
                    Units of
                    Stock
                    That
                    Have
                    Not
                    Vested
                    ($)
                  
                  
                  Equity
                    Incentive
                    Plan
                    Awards:
                    Number of
                    Unearned
                    Shares,
                    Units or
                    Other Rights
                    That Have
                    Not Vested
                    (#)
                  
                  
                  Equity
                    Incentive
                    Plan
                    Awards:
                    Market or
                    Payout
                    Value of
                    Unearned
                    Shares,
                    Units or
                    Other Rights
                    That Have
                    Not Vested
                    ($)Jonathan
                    Leinwand
                  
                  
                  921,052
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  0.190
                  
                  May
      22, 2010
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —1,400,000
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  0.105
                  
                  October
      18, 2010
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —2,916,667
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  0.090
                  
                  January
      10, 2011
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —





COMPENSATION
OF DIRECTORS




The
following table summarizes the compensation for our non-employee board of
directors for the fiscal years ended December 31, 2008 and
2007:


57





Name
                  
                  Fees
                    Earned or
                    Paid in
                    Cash
                    ($)
                  
                  
                  Stock Awards
                    ($)
                  
                  
                  Option
                    Awards ($)
                  
                  
                  Non-Equity
                    Incentive
                    Plan
                    Compensation
                    ($)
                  
                  
                  Non-Qualified
                    Deferred
                    Compensation
                    Earnings
                    ($)
                  
                  
                  All
                    Other
                    Compensation ($)
                  
                  
                  Total ($)(a)
                  
                  (b)
                  
                  
                  (c)
                  
                  
                  (d)
                  
                  
                  
                  
                  
                  (f)
                  
                  
                  (g)
                  
                  
                  (j)Przemyslaw
      Kostro, Chairman (2007)
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  18,750
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  18,750Patrick
      Heyn (2007)
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —Michael
      Castellano (2007
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —Peter
      Khoury (2007)
                  
                  
                  103,332
                  
                  
                  
                  76,099
                  
                  
                  
                  278,968
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  458,399




Compensation
paid to Directors who are also officers of the Company is reflected in Item 10.
Executive Compensation. We maintain a policy of compensating our directors
using cash and stock options. Currently, the Company determines Board
compensation on an individual basis. Employee members of the Board do not
receive additional compensation for their service on the Board.




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


Common
Stock





As of
March 31, 2009, there were 185,887,861 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





Title of Class
                        
                        Name & Address of
                          Beneficial
                        
                        Amount and
                          Beneficial
                        
                        
                        Nature of
                          Ownership
                        
                        
                        Percentage
                          of Class (1)Common
      Stock
                        
                        Przemyslaw
      L. Kostro Chairman
                          101
      NE 3 rd
      Ave, Suite 1500,
                          Fort
      Lauderdale, Florida 33301
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        0.00
                        %Common
      Stock
                        
                        Jonathan
      Leinwand, CEO Since October 2007 and Director Since August
      2005
                          101
      NE 3 rd
      Ave, Suite 1500,
                          Fort
      Lauderdale, Florida 33301
                        
                        
                        2,876,752
                        
                        
                        Direct
                        
                        
                        
                        1.55
                        %Total
      of all Officers and Directors as a Group
                        
                        
                        2,876,752
                        
                        
                        
                        
                        
                        
                        
                        1.55
                        %





(1) Based
on 185,887,861 shares issued and outstanding on March 31, 2009.




ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE





Certain
Relationships and Related Transactions





See Item
8, Notes 9 and 10 Common Stock Transactions and Stock Option, respectively, to
the Notes to Consolidated Financial Statements.


58


Director
Independence





Mr.
Kostro is independent as that term in defined under section 301 of the
Sarbanes-Oxley Act of 2002.




ITEM
14. PRINCIPAL ACCOUNTANT FEES AND SERVICES





AUDIT
FEES





The
following table summarizes the fees for Weinberg & Company, P.A.
services rendered to the Company during 2008 and 2007.




AmountTypeofFee
                
                Fiscal
                  Year2008
                
                
                Fiscal
                  Year2007Audit(1)
                
                $
                299,260
                
                
                $
                50,858Audit
      Related(2)
                
                
                —
                
                
                
                —Taxes
      (3)
                
                
                —
                
                
                
                —All
      Other (4)
                
                
                —
                
                
                
                —Total
                
                $
                299,260
                
                
                $
                50,858





(1)
            This
      category consists of fees for the audit of our annual financial statements
      included in the Company’s annual report on Form 10-KSB and review of
      the financial statements included in the Company’s quarterly reports on
      Form 10-QSB. This category also includes advice on audit and
      accounting matters that arose during, or as a result of, the audit or the
      review of interim financial statements, statutory audits required by
      non-U.S. jurisdictions and the preparation of an annual “management
      letter” on internal control
matters.




(2)
            Represents
      services that are normally provided by the independent auditors in
      connection with statutory and regulatory filings or engagements for those
      fiscal years, aggregate fees charged for assurance and related services
      that are reasonably related to the performance of the audit and are not
      reported as audit fees. These services include consultations regarding
      Sarbanes-Oxley Act requirements, various SEC filings and the
      implementation of new accounting
requirements.




(3)
            Represents
      aggregate fees charged for professional services for tax compliance and
      preparation, tax consulting and advice, and tax
  planning.




(4)
            Represents
      aggregate fees charged for products and services other than those services
      previously reported.




ITEM
14. EXHIBITS





Exhibit
      31.1
            Certification
      of the Chief Executive Officer and chief financial officer pursuant to
      Section 302 of the Sarbanes-Oxley Act of
  2002





Exhibit
      32.1
            Certification
      of the Chief Executive Officer and chief financial officer pursuant to
      U.S.C. Section 1350 as adopted pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002


59





SIGNATURES





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





SANSWIRE CORP.By:
                /s/ Jonathan LeinwandName: Jonathan Leinwand ,Title: Chief Executive Officer (Principal Executive Officer)Dated April 9, 2009





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





SIGNATURE
              
              TITLE
              
              DATE/s/ Jonathan Leinwand
              
              Chief
      Executive Officer, Principal Financial
              
              April
      9, 2009Jonathan
      Leinwand
              
              Officer
      and Director/s/ Przemyslaw Kostro
              
              Chairman
      of the Board
              
              April
      9, 2009Przemyslaw
      Kostro