UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
DC 20549





Form
10-Q


(Mark
one)


x QUARTERLY REPORT UNDER
SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE


ACT
OF 1934





For the
quarterly period ended September 30, 2008


OR


 ̈ TRANSITION REPORT UNDER
SECTION 13 OR 15 (d) OF THE EXCHANGE ACT





For the
transition period from ____________ to _____________





Commission
file number 0-23532





SANSWIRE
CORP.


(formerly
Globetel Communications Corp.)





(Exact
name of small business issuer as specified in its charter)





Delaware
                  
                  88-0292161(State
      or other jurisdiction
                  
                  (IRS
      Employer Identification No.)of
      incorporationor
      organization)





101 NE
3rd
Ave, Suite 1500,


Fort
Lauderdale, Florida 33301


(Address
of principal executive offices)





(954)
332-3759


(Issuer's
telephone number)





Indicate
by check mark whether registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes x No
 ̈





Indicated
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filter 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 in Rule
12b-2 of the Exchange Act)       Yes  ̈ No x





As of
March 31, 2009, there were 185,887,861 shares of the issuer's common stock
issued and outstanding.





Transitional
Small Business Disclosure Format (Check one): Yes  ̈ No x








TABLE OF
CONTENTS





PagePART I - FINANCIAL INFORMATIONItem 1.
                      Financial
      Statements.
                      3Item 2.
                      Management's
      Discussion and Analysis of Financial Condition andResults
      of Operations.
                      18Item 3.
                      Quantitative
      and Qualitative Disclosures About Market Risk.
                      22Item 4.
                      Controls
      and Procedures.
                      22PART II - OTHER INFORMATIONItem 1.
                      Legal
      Proceedings.
                      23Item 1a.
                      Risk
      Factors
                      26Item 2.
                      Unregistered
      Sales of Equity Securities and Use of Proceeds.
                      28Item 3.
                      Defaults
      Upon Senior Securities.
                      29Item 4.
                      Submission
      of Matters to a Vote of Security Holders.
                      29Item 5.
                      Other
      Information.
                      29Item 6.
                      Exhibits.
                      29




2





PART
I - FINANCIAL INFORMATION





Item 1. Financial
Statements.





SANSWIRE
CORP. (FORMERLY GLOBETEL COMMUNICATIONS CORP.)


AND
SUBSIDIARIES


CONDENSED
CONSOLIDATED BALANCE SHEETS




SEPTEMBER 30,
                                  2008
                                
                                
                                DECEMBER 31,
                                  2007(Unaudited)ASSETSCURRENT
      ASSETSCash
      and cash equivalents
                                
                                $
                                6,682
                                
                                
                                $
                                32,278Current
      assets from discontinued operations
                                
                                
                                6,406
                                
                                
                                
                                18,678TOTAL
      CURRENT ASSETS
                                
                                
                                13,088
                                
                                
                                
                                50,956Investment
      in joint venture
                                
                                
                                3,229,000
                                
                                
                                
                                —Deposits
                                
                                
                                —
                                
                                
                                
                                391,000TOTAL
      NONCURRENT ASSETS
                                
                                
                                3,229,000
                                
                                
                                
                                391,000TOTAL
      ASSETS
                                
                                $
                                3,242,088
                                
                                
                                $
                                441,956LIABILITIES
      AND STOCKHOLDERS’ DEFICITLIABILITIESCURRENT
      LIABILITIESAccounts
      payable
                                
                                $
                                3,706,695
                                
                                
                                $
                                3,155,722Notes
      and convertible notes payable, net of discount of $148,239 and
      $1,257,364
                                
                                
                                9,089,185
                                
                                
                                
                                8,056,220Accrued
      expenses and other liabilities
                                
                                
                                4,017,589
                                
                                
                                
                                1,067,355Current
      liabilities from discontinued operations
                                
                                
                                1,387,406
                                
                                
                                
                                1,387,381TOTAL
      LIABILITIES
                                
                                
                                18,200,875
                                
                                
                                
                                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;161,179,216
      and 129,756,897 shares issued and outstanding
                                
                                
                                1,613
                                
                                
                                
                                1,299Additional
      paid-in capital
                                
                                
                                109,903,777
                                
                                
                                
                                107,169,705Accumulated
      deficit
                                
                                
                                (124,864,177
                                )
                                
                                
                                (120,395,726
                                )TOTAL
      STOCKHOLDERS' DEFICIT
                                
                                
                                (14,958,787
                                )
                                
                                
                                (13,224,722
                                )TOTAL
      LIABILITIES AND STOCKHOLDERS' DEFICIT
                                
                                $
                                3,242,088
                                
                                
                                $
                                441,956





See
accompanying notes to condensed consolidated financial statements




3




SANSWIRE
CORP. (FORMERLY GLOBETEL COMMUNICATIONS CORP.)


AND
SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


FOR
THE PERIODS ENDED





THREE
      MONTHS ENDED
                      
                      
                      NINE
      MONTHS ENDEDSEPTEMBER
      30,
                      
                      
                      SEPTEMBER
      30,2008
                      
                      
                      2007
                      
                      
                      2008
                      
                      
                      2007(Unaudited)
                      
                      
                      (Unaudited)
                      
                      
                      (Unaudited)
                      
                      
                      (Unaudited)REVENUES
                      
                      $
                      —
                      
                      
                      $
                      15
                      
                      
                      $
                      —
                      
                      
                      $
                      53,754COST
      OF REVENUES
                      
                      
                      —
                      
                      
                      
                      2,291
                      
                      
                      
                      —
                      
                      
                      
                      13,404GROSS
      MARGIN (LOSS)
                      
                      
                      —
                      
                      
                      
                      (2,276
                      )
                      
                      
                      —
                      
                      
                      
                      40,350EXPENSESPayroll
      and related taxes
                      
                      
                      135,496
                      
                      
                      
                      158,011
                      
                      
                      
                      666,531
                      
                      
                      
                      2,899,573Consulting
      fees
                      
                      
                      422,768
                      
                      
                      
                      286,569
                      
                      
                      
                      1,138,796
                      
                      
                      
                      1,449,432Noncash
      officers' and directors' compensation
                      
                      
                      97,500
                      
                      
                      
                      95,864
                      
                      
                      
                      435,000
                      
                      
                      
                      696,790Research
      and development
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      (14,856
                      )General
      and administrative
                      
                      
                      111,055
                      
                      
                      
                      359,740
                      
                      
                      
                      275,059
                      
                      
                      
                      1,413,232TOTAL
      EXPENSES
                      
                      
                      766,819
                      
                      
                      
                      900,184
                      
                      
                      
                      2,515,386
                      
                      
                      
                      6,444,171LOSS
      FROM OPERATIONS
                      
                      
                      (766,819
                      )
                      
                      
                      (902,460
                      )
                      
                      
                      (2,515,386
                      )
                      
                      
                      (6,403,821
                      )OTHER
      INCOME (EXPENSE)Loss/Gain
      on extinguishment of debt
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      (1,096,650
                      )
                      
                      
                      254,200Interest
      expense, net
                      
                      
                      (311,263
                      )
                      
                      
                      (758,541
                      )
                      
                      
                      (856,218
                      )
                      
                      
                      (1,982,382
                      )NET
      OTHER INCOME (EXPENSE)
                      
                      
                      (311,263
                      )
                      
                      
                      (758,541
                      )
                      
                      
                      (1,952,868
                      )
                      
                      
                      (1,728,182
                      )LOSS
      FROM CONTINUING OPERATIONS
                      
                      
                      (1,078,082
                      )
                      
                      
                      (1,661,001
                      )
                      
                      
                      (4,468,254
                      )
                      
                      
                      (8,132,003
                      )GAIN/LOSS
      FROM DISCONTINUED OPERATIONS
                      
                      
                      —
                      
                      
                      
                      (1,752
                      )
                      
                      
                      (196
                      )
                      
                      
                      (1,112,973
                      )NET
      LOSS
                      
                      $
                      (1,078,082
                      )
                      
                      $
                      (1,662,753
                      )
                      
                      $
                      (4,468,450
                      )
                      
                      $
                      (9,244,976
                      )WEIGHTED
      AVERAGE NUMBER OF COMMON SHARES OUTSTANDINGBASIC
      and DILUTED
                      
                      
                      155,459,034
                      
                      
                      
                      128,008,428
                      
                      
                      
                      133,121,067
                      
                      
                      
                      119,451,582LOSS
      PER SHARE FROM CONTINUING OPERATIONSBASIC
      and DILUTED
                      
                      $
                      (
      0.01
                      )
                      
                      $
                      (
      0.01
                      )
                      
                      $
                      (
      0.03
                      )
                      
                      $
                      (
      0.07
                      )LOSS
      PER SHARE FROM DISCONTINUED OPERATIONSBASIC
      and DILUTED
                      
                      $
                      0.00
                      
                      
                      $
                      (
      0.00
                      )
                      
                      $
                      (
      0.00
                      )
                      
                      $
                      (
      0.01
                      )NET
      LOSS PER SHAREBASIC
      and DILUTED
                      
                      $
                      (
      0.01
                      )
                      
                      $
                      (
      0.01
                      )
                      
                      $
                      (
      0.03
                      )
                      
                      $
                      (
      0.08
                      )




See
accompanying notes to condensed consolidated financial statements


4




SANSWIRE
CORP. (FORMERLY GLOBETEL COMMUNICATIONS CORP.)


AND
SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30,




2008
                    
                    
                    2007(Unaudited)
                    
                    
                    (Unaudited)CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      loss
                    
                    $
                    (4,468,450
                    )
                    
                    $
                    (9,244,976
                    )Adjustments
      to reconcile net loss to net cash used by operating
      activities:Amortization
      of debt discount
                    
                    
                    207,514
                    
                    
                    
                    798,639Loss/Gain
      on extinguishment of debt
                    
                    
                    1,096,650
                    
                    
                    
                    (254,200
                    )Stock
      based compensation
                    
                    
                    391,444
                    
                    
                    
                    1,651,096Fair
      value of vested options
                    
                    
                    244,831
                    
                    
                    
                    1,890,602Fair
      value of modification of warrants
                    
                    
                    —
                    
                    
                    
                    421,737Interest
      expense on convertible notes payable
                    
                    
                    421,502
                    
                    
                    
                    413,927Noncash
      activity from discontinued operations
                    
                    
                    —
                    
                    
                    
                    1,056,479Common
      stock exchanged for interest and financing costs
                    
                    
                    227,080
                    
                    
                    
                    63,000(Increase)
      decrease in assets:Decrease
      in assets relating to discontinued operations
                    
                    
                    12,272
                    
                    
                    
                    98,849Accounts
      receivable
                    
                    
                    —
                    
                    
                    
                    271,262Deposit
                    
                    
                    —
                    
                    
                    
                    (30,000
                    )Increase
      (decrease) in liabilities:Accounts
      payable
                    
                    
                    555,192
                    
                    
                    
                    552,232Accrued
      expenses and other liabilities
                    
                    
                    914,204
                    
                    
                    
                    472,420Decrease/Increase
      in liabilities relating to discontinued operations
                    
                    
                    25
                    
                    
                    
                    (271,263
                    )NET
      CASH USED BY OPERATING ACTIVITIES
                    
                    
                    (397,736
                    )
                    
                    
                    (2,110,196
                    )CASH
      FLOWS FROM INVESTING ACTIVITIESPayment
      on joint venture
                    
                    
                    (385,000
                    )
                    
                    
                    —Investing
      activities from discontinued operations
                    
                    
                    —
                    
                    
                    
                    —NET
      CASH USED BY INVESTING ACTIVITIES
                    
                    
                    (385,000
                    )
                    
                    
                    —CASH
      FLOWS FROM FINANCING ACTIVITIESIssuance
      of common stock – exercise of warrants
                    
                    
                    —
                    
                    
                    
                    750,000Payments
      on notes payable
                    
                    
                    (25,139
                    )
                    
                    
                    —Proceeds
      from notes and loans payable
                    
                    
                    782,279
                    
                    
                    
                    1,375,812Bank
      overdraft
                    
                    
                    —
                    
                    
                    
                    (14,664
                    )NET
      CASH PROVIDED BY FINANCING ACTIVITIES
                    
                    
                    757,140
                    
                    
                    
                    2,111,148NET
      (DECREASE) INCREASE IN CASH AND EQUIVALENTS
                    
                    
                    (25,596
                    )
                    
                    
                    952CASH
      AND EQUIVALENTS – BEGINNING OF PERIOD
                    
                    
                    32,278
                    
                    
                    
                    4,243CASH
      AND EQUIVALENTS – ENDING OF PERIOD
                    
                    $
                    6,682
                    
                    
                    $
                    5,195SUPPLEMENTAL
      DISCLOSURESCash
      paid during the period for:Interest
                    
                    $
                    122
                    
                    
                    $
                    8,809NON-CASH
      INVESTING AND FINANCING ACTIVITIES:Shares
      issued for debts
                    
                    
                    —
                    
                    
                    
                    4,598,333Shares
      issued for joint venture
                    
                    
                    268,000
                    
                    
                    
                    —Shares
      for accrued expenses
                    
                    
                    148,970
                    
                    
                    
                    695,732Conversion
      of notes payable to common stock
                    
                    
                    1,293,442
                    
                    
                    
                    —Accrued
      expense for joint venture
                    
                    
                    659,000
                    
                    
                    
                    —Conversion
      of notes payable to common stock
                    
                    
                    2,844,000
                    
                    
                    
                    —Non-cash
      equity-warrant valuation and intrinsic value of beneficial conversion
      associated with convertible notes
                    
                    
                    194,080
                    
                    
                    
                    945,000





5




SANSWIRE
CORP. (FORMERLY GLOBETEL COMMUNICATIONS CORP.)


AND
SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


PERIODS
ENDED SEPTEMBER 30, 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.





BASIS OF
PRESENTATION





The
condensed consolidated financial statements of the Company include the accounts
of its subsidiaries. These unaudited condensed consolidated financial statements
have been prepared by management in accordance with accounting principles
generally accepted in the United States and with the instructions to Form 10-Q
and Article 10 of Regulation S-X.





In the
opinion of management, the unaudited condensed consolidated financial statements
reflect all adjustments considered necessary for a fair statement of the
Company’s financial position as of September 30, 2008 and the results of
operations for the three and nine months ended September 30, 2008 and 2007, and
cash flows for the nine month periods ended September 30, 2008 and 2007,
consisting only of normal and recurring adjustments. All significant
intercompany transactions have been eliminated in consolidation. Operating
results for the three and nine months ended September 30, 2008 are not
necessarily indicative of the results that may be expected for the fiscal year
ending December 31, 2008. The interim condensed consolidated financial
statements do not include all of the information and footnotes required by
accounting principles generally accepted in the United States for complete
financial statements. For further information, refer to the Company’s
consolidated financial statements and footnotes thereto for the year ended
December 31, 2007 filed on Form 10-KSB filed on October 9, 2008.




6




SANSWIRE
CORP. (FORMERLY GLOBETEL COMMUNICATIONS CORP.)


AND
SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


PERIODS
ENDED SEPTEMBER 30, 2008 AND 2007





GOING
CONCERN


The
accompanying condensed consolidated 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 condensed consolidated financial statements, the
Company had a net loss of $4,468,450 for the nine months ended September 30,
2008 and a negative cash flow from operations of $397,731 for the nine months
ended September 30, 2008, and had a working capital deficiency of $18,187,787
and a stockholders’ deficit of $14,958,787 at September 30,
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 condensed consolidated financial
statements do not include any adjustments that might be necessary if the Company
is unable to continue as a going concern. The Company anticipates that a net
loss will continue throughout 2008 and for fiscal 2009.


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 6)





CASH AND
CASH EQUIVALENTS





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





BANK
OVERDRAFT





The
Company records any negative balances in its bank accounts as a bank
overdraft.





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.




7





SANSWIRE
CORP. (FORMERLY GLOBETEL COMMUNICATIONS CORP.)


AND
SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


PERIODS
ENDED SEPTEMBER 30, 2008 AND 2007




These
Agreements usually require the Company 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 September 30, 2008 the Company has
no registration rights agreement requiring penalties to be
recorded.


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.





FAIR
VALUE OF FINANCIAL INSTRUMENTS





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





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 September 30, 2008, the shares outstanding
would be 228,566,154.





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.








8




SANSWIRE
CORP. (FORMERLY GLOBETEL COMMUNICATIONS CORP.)


AND
SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


PERIODS
ENDED SEPTEMBER 30, 2008 AND 2007





STOCK-BASED
COMPENSATION
  The
Company periodically issues stock options and warrants to employees and
non-employees in non-capital raising transactions for services and for financing
costs. The Company accounts for stock option and warrant grants issued and
vesting to employees using SFAS No. 123R effective January 1, 2006, and for all
share-based payments granted based on the requirements of SFAS No. 123R. The
Company accounts for stock
option and warrant grants issued and vesting to non-employees in accordance with
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” and
EITF 00-18 “Accounting Recognition for Certain Transactions involving Equity
Instruments Granted to Other Than Employees” whereas the value of the stock
compensation is based upon the measurement date as determined at either a) the
date at which a performance commitment is reached, or b) at the date at which
the necessary performance to earn the equity instruments is
complete.





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.





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 periods ended September
30, 2008 and December 31, 2007.





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 condensed consolidated statements of operations for the
periods ended September 30, 2008 and 2007 is summarized as follows:





9
 
 SANSWIRE
CORP. (FORMERLY GLOBETEL COMMUNICATIONS CORP.)
 AND
SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 PERIODS
ENDED SEPTEMBER 30, 2008 AND 2007
 
 THREE
      MONTHS ENDED
                
                
                NINE
      MONTHS ENDEDSEPTEMBER
      30,
                
                
                SEPTEMBER
      30,Telecom
                
                2008
                
                
                2007
                
                
                2008
                
                
                2007Gain/Loss
      from discontinued operations
                
                $
                —
                
                
                $
                1,167
                
                
                $
                (196
                )
                
                $
                (738,569
                )GlobeTel
      WirelessGain/Loss
      from discontinued operations
                
                
                —
                
                
                
                (2,919
                )
                
                
                —
                
                
                
                (374,404
                )Total
      loss from discontinued operations
                
                $
                —
                
                
                $
                (1,752
                )
                
                $
                (196
                )
                
                $
                (1,112,973
                )
 
 The
Company incurred the following losses from discontinued operations for the three
months ended September 31, 2008 and 2007:
 
 SEPTEMBER
      30,  2008
                
                Telecom
                
                
                GlobeTel
      Wireless
                
                
                TotalGeneral
      and administrative
                
                $
                —
                
                
                $
                —
                
                
                $
                —Loss
      from discontinued operations
                
                $
                —
                
                
                $
                —
                
                
                $
                —
 
 
 SEPTEMBER
      30, 2007
                
                Telecom
                
                
                GlobeTel
      Wireless
                
                
                TotalGeneral
      and administrative
                
                $
                1,167
                
                
                $
                (2,919
                )
                
                $
                (1,752
                )Loss
      from discontinued operations
                
                $
                1,167
                
                
                $
                (2,919
                )
                
                $
                (1,752
                )
 
 The
Company incurred the following losses from discontinued operations for the nine
months ended September 30, 2008 and 2007:
 
 SEPTEMBER
      30, 2008
                
                Telecom
                
                
                GlobeTel
      Wireless
                
                
                TotalGeneral
      and administrative
                
                $
                (196
                )
                
                $
                —
                
                
                $
                (196
                )Loss
      from discontinued operations
                
                $
                (196
                )
                
                $
                —
                
                
                $
                (196
                )
 
 SEPTEMBER
      30, 2007
                
                Telecom
                
                
                GlobeTel
      Wireless
                
                
                TotalRevenue
                
                $
                4,849
                
                
                $
                —
                
                
                $
                4,849Cost
      of sales
                
                
                (11,676
                )
                
                
                —
                
                
                
                (11,676
                )Gross
      margin (loss)
                
                
                (6,826
                )
                
                
                —
                
                
                
                (6,826
                )Payroll
      and related taxes
                
                
                (18,935
                )
                
                
                (91,865
                )
                
                
                (110,800
                )General
      and administrative
                
                
                (48,815
                )
                
                
                (35,789
                )
                
                
                (84,604
                )Consulting
                
                
                (9,321
                )
                
                
                —
                
                
                
                (9,321
                )Depreciation
      and amortization
                
                
                (654,672
                )
                
                
                —
                
                
                
                (654,672
                )Loss
      on Investment
                
                
                —
                
                
                
                (246,750
                )
                
                
                (246,750
                )Loss
      from discontinued operations
                
                $
                (738,569
                )
                
                $
                (374,404
                )
                
                $
                (1,112,973
                )


10
 
  SANSWIRE
CORP. (FORMERLY GLOBETEL COMMUNICATIONS CORP.)
 AND
SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 PERIODS
ENDED SEPTEMBER 30, 2008 AND 2007
 
 The
Company had the following assets and liabilities from its discontinued
operations on its consolidated balance sheet as of September 30, 2008 and
December 31, 2007:
 
 SEPTEMBER
      30, 2008
                
                Telecom
                
                
                GlobeTel
      Wireless
                
                
                TotalCash
                
                $
                6,406
                
                
                $
                —
                
                
                $
                6,406Total
      assets
                
                
                6,406
                
                
                
                —
                
                
                
                6,406Accounts
      payable
                
                
                140,116
                
                
                
                1,216,208
                
                
                
                1,356,324Accrued
      liabilities
                
                
                9,605
                
                
                
                21,477
                
                
                
                31,082Total
      current liabilities
                
                
                149,721
                
                
                
                1,237,685
                
                
                
                1,387,406Net
      liabilities of discontinued operations
                
                $
                143,315
                
                
                $
                1,237,685
                
                
                $
                1,381,000
 
 DECEMBER
      31, 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. NOTES AND CONVERTIBLE NOTES PAYABLE
 
 September
      30,
                
                
                December
      31,2008
                
                
                2007(A)
      Notes payable
                
                $
                5,997,030
                
                
                $
                6,139,357(B)
      Convertible notes payable, net of unamortized discount of $0 and
      $454,531
                
                
                276,860
                
                
                
                825,469(C)
      Convertible promissory notes, net of unamortized discount of $148,239 and
      $802,833
                
                
                1,726,738
                
                
                
                336,036Total
                
                
                8,000,628
                
                
                
                7,300,862Accrued
      interest
                
                
                1,088,557
                
                
                
                755,358Total
                
                $
                9,089,185
                
                
                $
                8,056,220
 
 (A) NOTES
PAYABLE
 
 During
January 2008, the Company received a total of $7,673. As of September 30, 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 $742,844 as of September 30, 2008.
 
 In
January 2008, a separate note holder converted $150,000 of the loans to
1,428,571 shares of common stock.  As of September 30, 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 $144,653 as of September 30, 2008.
 
 (B)
CONVERTIBLE NOTES PAYABLE
 
 On
January 16, 2008, an agreement becomes effective that changes the 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 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. For the Black Scholes calculation, the Company
assumed no dividend yield, a risk
 11


SANSWIRE
CORP. (FORMERLY GLOBETEL COMMUNICATIONS CORP.)


AND
SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


PERIODS
ENDED SEPTEMBER 30, 2008 AND 2007





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.





As of
September 30, 2008, $1,091,442 of principal and interest was converted into
15,104,560 shares of the Company common stock.





(C)
CONVERTIBLE PROMISSORY NOTES





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.





As of
September 30, 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.  For the nine months ended September 30, 2008, $11,000
principal or interest had been converted into 104,762 shares of Company common
stock.  Subsequent to September 30, 2008, an additional $41,000 of
principal and interest was converted into 438,870 of Company common
stock.





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.





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.





12





SANSWIRE
CORP. (FORMERLY GLOBETEL COMMUNICATIONS CORP.)


AND
SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


PERIODS
ENDED SEPTEMBER 30, 2008 AND 2007





In March
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 nine months ended September 30, 2008, the
Company amortized $7,760 of the valuation discount, which is reflected as
financing costs in the Company’s consolidated statements of
operations.  As of the date of this report, no principal or
interest has been converted.





From
January through February 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
nine months ended September 30, 2008, the Company amortized $8,432 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 into the Company’s common stock however $25,139 was
repaid.





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.





NOTE
4. TAO TECHNOLOGIES TRANSACTIONS





On June
3, 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., through its wholly-owned
subsidiary Sanswire Corp.—Florida.  Additionally, Sanswire-TAO would
register the patents and 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 payments as of September 30, 2008 of $268,000, the balance of
$2,570,000 due for the investment is accrued in accrued expenses as of September
30, 2008.  Subsequent to September 30, 2008, the Company made
additional payments of $435,000. Finally, the investment will be subject to
impairment in the future.


13





SANSWIRE
CORP. (FORMERLY GLOBETEL COMMUNICATIONS CORP.)


AND
SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


PERIODS
ENDED SEPTEMBER 30, 2008 AND 2007





NOTE
5. 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
6. 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, but
which does not add any new defendants. On March 23, 2009 the Court granted the
SEC’s motion and extended the fact discovery deadline in the case until July 31,
2009.  The parties are currently engaged in discovery.  The
Company has been vigorously defending itself in this action.




14




SANSWIRE
CORP. (FORMERLY GLOBETEL COMMUNICATIONS CORP.)


AND
SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


PERIODS
ENDED SEPTEMBER 30, 2008 AND 2007




Richard Stevens v. GlobeTel


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





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.





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.





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.





NOTE
7. COMMON STOCK TRANSACTIONS





During
the nine month period ended September 30, 2008, the Company issued an aggregate
of 28,742,319 shares of common stock for debt, consulting services, incentives,
and bonuses to Officers of the Company, consultants and employees. Of the shares
issued, 4,222,222 shares, or 13.4% were issued to insiders and affiliates as
restricted securities and in accordance with SEC Rule 144. The common stock
issued was valued at prices ranging from $0.035 to $0.105 per share, based on
the closing market prices on the date the board of directors authorized the
issuances.


During
January 2008, the Company issued an aggregate of 50,000 shares of common stock
for consulting services valued at $5,000. The common stock was issued in place
of cash payments, and was valued at $0.10 per share, based on the closing market
prices on the date the board of directors authorized these
issuances.




During
March 2008, the Company issued an aggregate of 2,680,000 shares of common stock
as a deposit on investment in joint venture valued at $268,000. The common stock
was issued in place of cash payments, and was valued at $0.10 per share, based
on the closing market prices on the date the board of directors authorized these
issuances.




During
July 2008, the Company issued an aggregate of 222,222 shares of common stock for
consulting services valued at $16,444. The common stock was issued in place of
cash payments, and was valued at $0.074 per share, based on the closing market
prices on the date the board of directors authorized these
issuances.





15




SANSWIRE
CORP. (FORMERLY GLOBETEL COMMUNICATIONS CORP.)


AND
SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


PERIODS
ENDED SEPTEMBER 30, 2008 AND 2007





During
August 2008, the Company issued an aggregate of 1,200,000 shares of common stock
for consulting services valued at $56,400. The common stock was issued in place
of cash payments, and was valued at $0.047 per share, based on the closing
market prices on the date the board of directors authorized these
issuances.





During
September 2008, the Company issued an aggregate of 1,000,000 shares of common
stock for consulting services valued at $63,000. The common stock was issued in
place of cash payments, and was valued at $0.063 per share, based on the closing
market prices on the date the board of directors authorized these
issuances.





Subsequent
to September 30, 2008, the Company issued an aggregate of 3,775,000 shares of
common stock for consulting services valued at $216,200. The common stock was
issued in place of cash payments, and was valued between $0.056 and $0.068 per
share, based on the closing market prices on the date the board of directors
authorized these issuances. The
Company also issued an aggregate of 15,351,017 shares of common stock for debt,
incentives, and bonuses to Officers of the Company, consultants and employees.
Of the shares issued, 5,548,280 shares were issued to insiders and affiliates as
restricted securities and in accordance with SEC Rule 144. The common stock
issued was valued at prices ranging from $0.039 to $0.105 per share, based on
the closing market prices on the date the board of directors authorized the
issuances.





NOTE
8. STOCK OPTIONS AND WARRANTS





STOCK
OPTIONS





During
the nine months ended September 30, 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




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
September 30, 2008, the exercise price of all options outstanding exceeds the
market price of the Company’s stock, and therefore there was no intrinsic
value.





Employee
options vest according to the terms of the specific grant and expire from 3 to
5 years from date of grant. As of September 30, 2008, all options issued
and outstanding have fully vested and thus there was no deferred compensation,
Stock option activity as of September 30, 2008 was as follows:





Number of Options
                  (in shares)
                
                
                Weighted Average
                  Exercise PriceOutstanding
      at December 31, 2007
                
                
                28,705,170
                
                
                $
                .600Options
      Granted
                
                
                3,694,444
                
                
                
                .091Options
      Forfeited
                
                
                —
                
                
                
                —Options
      Cancelled
                
                
                (5,500,000
                )
                
                
                .317Outstanding
      at September 30, 2008
                
                
                26,899,614
                
                
                $
                .588





16





SANSWIRE
CORP. (FORMERLY GLOBETEL COMMUNICATIONS CORP.)


AND
SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


PERIODS
ENDED SEPTEMBER 30, 2008 AND 2007





WARRANTS





The
following table summarizes certain information about the Company’s stock
purchase warrants (including the warrants discussed in Note 3).




Warrants
                    Class A
                  
                  
                  Warrants
                    Class B
                  
                  
                  Weighted Average
                    Exercise PriceOutstanding
      at December 31, 2007
                  
                  
                  8,108,129
                  
                  
                  
                  5,715,380
                  
                  
                  $
                  0.330Warrants
      Granted
                  
                  
                  3,688,599
                  
                  
                  
                  2,459,066
                  
                  
                  
                  0.252Warrants
      Exercised
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —Outstanding
      at September 30, 2008
                  
                  
                  11,796,728
                  
                  
                  
                  8,147,446
                  
                  
                  $
                  0.306





NOTE
9. INCOME TAXES





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.





NOTE
10. SUBSEQUENT EVENTS





On
October 3, 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.  On February 11, 2009, $25,000 of principal was converted
into 238,096 shares of the Company’s common stock.





On
October 3, 2008, American Express Travel Related Services Company, Inc. received
a final judgment for $404,113.  This liability was previously recorded
in the Company’s accounts payable as incurred.





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.  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. On October 13,
2008, $145,000 in principal and interest was been converted into 1,369,895 of
the Company’s common stock.





17





SANSWIRE
CORP. (FORMERLY GLOBETEL COMMUNICATIONS CORP.)


AND
SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


PERIODS
ENDED SEPTEMBER 30, 2008 AND 2007





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.





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.





Item
2.  Management's Discussion and Analysis of Financial Condition and
Results of Operations





Forward-looking
Information





This
quarterly report contains forward-looking statements. For this purpose, any
statements contained herein that are not statements of historical fact may be
deemed to be forward-looking statements. These statements relate to future
events or to our future financial performance. In some cases, you can identify
forward-looking statements by terminology such as "may," "will," "should,"
"expects," "plans," "anticipates," "believes," "estimates," "predicts,"
"potential" or "continue" or the negative of such terms or other comparable
terminology. These statements are only predictions. Actual events or results may
differ materially. There are a number of factors that could cause our actual
results to differ materially from those indicated by such forward-looking
statements. See our annual reports on Form 10-KSB for the years ended December
31, 2007 and 2006.





Although
we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance,
or achievements. Moreover, we do not assume responsibility for the accuracy and
completeness of such forward-looking statements. We are under no duty to update
any of the forward-looking statements after the date of this report to conform
such statements to actual results.





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.





18





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.





RESULTS
OF OPERATIONS





The
following discussion and analysis summarizes the results of operations of the
Company for the three and nine month periods ended September 30, 2008 and
2007.





COMPARISON
OF THREE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007





REVENUES.
For the three month period ended September 30, 2008, we had no gross sales,
representing a decrease of 100% over the prior three month period ended
September 30, 2007 when our gross sales were $15. 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. For the three month period ended September 30, 2008, we had no cost of
sales representing a decrease of 100% from $2,291 for the three month period
ended September 30, 2007.





GROSS
MARGIN. Our gross margin was $0 for the three month period ended September 30,
2008, compared to a loss of $2,276 or 15,173.3% for the three month period ended
September 30, 2007, a decrease of 100%. The decrease is due to the fact the
company had minimal 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 the three month period ended September 30, 2008 were $766,819 compared to
the three month period ended September 30, 2007 which had operating expenses of
$900,184 a decrease of $133,365 or 14.8%. The decrease was primarily
due to a continued reduction of expenses related to our operations,
facilities and workforce during 2008.


During
the three month period ended September 30, 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.





19





LOSS FROM
OPERATIONS. We had an operating loss of $766,819 for the three month period
ended September 30, 2008 as compared to an operating loss of $902,460 for the
three month period ended September 30, 2007, primarily due to an increase in
amortization of the intangible.





OTHER
INCOME (EXPENSE). We had net other expenses totaling $311,263 during the three
month period ended September 30, 2008 compared to other income of $758,541
during the three month period ended September 30, 2007. This variance was due
primarily to the 2007 non cash charges related to shares issued for
interest charges in reference with our convertible debentures of
$333,753.





GAIN/LOSS
FROM DISCONTINUED OPERATIONS. During the three month period ended September 30,
2008 we had no activity related to our discontinued operations compared to a
loss of $1,752 during the three month period ended September 30, 2007. See
note 2 in the financial statements for more information regarding the
discontinued operations.





NET LOSS.
We had a net loss of $1,078,082 in the three month period ended September 30,
2008 compared to $1,662,753 in the three month period ended September 30, 2007.
The decrease in net loss is primarily attributable to the decrease in the
operating expenses as well as other items discussed above.





COMPARISON
OF NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007





REVENUES.
For the nine month period ended September 30, 2008, we had no gross sales,
representing a decrease of 100% over the prior nine month period ended September
30, 2007 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. For the nine month period ended September 30, 2008, we had no cost of
sales representing a decrease of 100% from $13,404 for the nine month period
ended September 30, 2007.





GROSS
MARGIN. Our gross margin was $0 for the nine month period ended September 30,
2008, compared to our gross loss of $40,350 or 75.1% for the nine month period
ended September 30, 2007, a decrease of 100%. The decrease is due to the fact
the company had minimal 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 the nine month period ended September 30, 2008 were $2,515,386 compared to
the nine month period ended September 30, 2008 which had operating expenses of
$6,444,171 a decrease of $3,928,785 or 61.0%. The decrease was primarily
due to a continued reduction of expenses related to our operations,
facilities and workforce during 2008.


During
the nine month period ended September 30, 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.





LOSS FROM
OPERATIONS. We had an operating loss of $2,515,386 for the nine month period
ended September 30, 2008 as compared to an operating loss of $6,403,821 for the
nine month period ended September 30, 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 $1,952,868 during the nine
month period ended September 30, 2008 compared to $1,728,182 during the
nine month period ended September 30, 2007. This variance was due primarily to
the non cash charges related to the modifications of our convertible debentures
of $1,096,650 compared to a $254,200 gain in 2007.




20





Interest
expense for the nine month period ended September 30, 2008 was $856,218 compared
to $1,982,382 for the nine month period ended September 30, 2007. Interest
expense decrease was primarily due one time charges incurred in 2007 related to
the modifications of the warrants associated with our convertible debentures of
$421,737 and non cash charges related to shares issued for interest charges in
reference with our convertible debentures of $333,753.





GAIN/LOSS
FROM DISCONTINUED OPERATIONS. During the nine month period ended September 30,
2008 we had a loss of $196, related to our discontinued operations compared to
$1,112,973 during the nine month period ended September 30, 2007. See note 2 in
the financial statements for more information regarding the discontinued
operations.





NET LOSS.
We had a net loss of $4,468,450 in the nine month period ended September 30,
2008 compared to $9,244,976 in the nine month period ended September 30, 2007.
The decrease in net loss is primarily attributable to the crease in the
operating expenses as discussed above.





LIQUIDITY
AND CAPITAL RESOURCES





ASSETS.
At September 30, 2008, the Company had total assets of $3,242,088 compared to
total assets of $441,956 as of December 31, 2007.





The
current assets at September 30, 2008, were $13,088 compared to $50,956 at
December 31, 2007. As of September 30, 2008, we had $6,682 of cash and cash
equivalents compared to $32,378 at December 31, 2007.





The
Company had a $3,229,000 investment in a joint venture as of September 30,
2008 compared to $0 as of December 31, 2007.  The Company had no
deposits as of September 30, 2008 compared to $391,000 as of December 31,
2007. The deposits relate to payments accrued toward the investment in a
joint venture that was acquired in June 2008.  This deposit was
applied as an investment in a joint venture in June 2008.  See
note 4 in the financial statements for more information regarding the
transaction.


LIABILITIES.
At September 30, 2008, the Company had total liabilities of $18,200,875 compared
to total liabilities of $13,666,678 as of December 31, 2007. The increase
of $4,534,197 was principally due to the net liability incurred in association
of the acquisition of the intangible asset of $2,870,000 which was the balance
after the application of a deposit.  The balance of the increase was
for the increase in the current portion of payments due on the notes payable of
$1,032,965 (see note 3 of the financial statements).




CASH
FLOWS. Our cash used in operating activities was $397,736 compared to $2,110,196
for the comparative period. The decrease was primarily due to the decreased
level of operations and operating activities and changes in our current assets
and liabilities.





Net cash
provided by financing activities was $757,140 principally from the execution of
new convertible debentures, as compared to $2,111,148 in the prior
year.





The
accompanying condensed consolidated 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 condensed consolidated financial statements, the
Company had a net loss of $4,468,450 for the nine months ended September 30,
2008 and a negative cash flow from operations of $397,731 for the nine months
ended September 30, 2008, and had a working capital deficiency of $18,187,787
and a stockholders’ deficit of $14,958,787 at September 30,
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 condensed consolidated financial
statements do not include any adjustments that might be necessary if the Company
is unable to continue as a going concern. The Company anticipates that a net
loss will continue throughout 2008 and for fiscal 2009.
  21





Throughout
2007, 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.





Subsequent
to September 30, 2008, the Company has subsequently raised approximately
$560,000 from investors; however this is not adequate funding to cover the
Company’s working capital deficit or the net loss for the nine month period
ended September 30, 2008 of approximately $4,468,450.





As
reflected in the accompanying financial statements, during the nine month period
ended September 30, 2008 we had a net loss of $4,468,450 compared to a net
loss of $9,244,976 during the nine month period ended September 30, 2007.
Consequently, there is an accumulated deficit of $124,864,177 at September 30,
2008 compared to $120,395,726 at December 31, 2007.


Critical
Accounting Policies and Use of Estimates





Estimates





The
preparation of consolidated financial statements requires us to make certain
estimates and assumptions that affect the reported amounts of assets and
liabilities, the reported amounts and classification of expense, and the
disclosure of contingent assets and liabilities. We evaluate our estimates and
assumptions on an ongoing basis. We base our estimates on historical experience
and various other assumptions that we believe to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.





Accounting
for stock options





We
believe that it is important for investors to be aware that there is a high
degree of subjectivity involved in estimating the fair value of stock-based
compensation, that the expenses recorded for stock-based compensation in the
Company’s financial statements may differ significantly from the actual value
(if any) realized by the recipients of the stock awards, and that the expenses
recorded for stock-based compensation will not result in cash payments from the
Company.





Item
3.  Quantitative and Qualitative Disclosures About Market
Risk





Not
applicable





Item
4.  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
September 30, 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 September 30, 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.


22





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 period ended September 30, 2008
that have materially affected or are reasonably likely to materially affect our
internal control over financial reporting.





PART
II - OTHER INFORMATION




Item
1.  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, 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.


23





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, but
which does not add any new defendants. On March 23, 2009 the Court granted the
SEC’s motion and extended the fact discovery deadline in the case until July 31,
2009.   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.


24


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.





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.


25





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.





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
CollierCounty,
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.





Item
1(A).  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.


26





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
$4,468,254 for the nine months ended September 30, 2008 and a net loss of
$11,605,478 during fiscal 2007.  We anticipate that our net loss will
continue throughout 2008 and 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 20, 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.





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


27





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
2.  Unregistered Sales of Equity Securities and Use of
Proceeds





During
the six month period ended September 30, 2008, the Company issued an aggregate
of 31,422,319 shares of common stock for debt, consulting services, incentives,
and bonuses to Officers of the Company, consultants and employees. Of the shares
issued, 4,222,222 shares, or 13.4% were issued to insiders and affiliates as
restricted securities and in accordance with SEC Rule 144. The common stock
issued was valued at prices ranging from $0.035 to $0.105 per share, based on
the closing market prices on the date the board of directors authorized the
issuances.





During
January 2008, the Company issued an aggregate of 50,000 shares of common stock
for consulting services valued at $5,000. The common stock was issued in place
of cash payments, and was valued at $0.10 per share, based on the closing market
prices on the date the board of directors authorized these
issuances.


28


During
July 2008, the Company issued an aggregate of 222,222 shares of common stock for
consulting services valued at $16,444. The common stock was issued in place of
cash payments, and was valued at $0.074 per share, based on the closing market
prices on the date the board of directors authorized these
issuances.





During
August 2008, the Company issued an aggregate of 1,200,000 shares of common stock
for consulting services valued at $56,400. The common stock was issued in place
of cash payments, and was valued at $0.047 per share, based on the closing
market prices on the date the board of directors authorized these
issuances.





During
September 2008, the Company issued an aggregate of 1,000,000 shares of common
stock for consulting services valued at $63,000. The common stock was issued in
place of cash payments, and was valued at $0.063 per share, based on the closing
market prices on the date the board of directors authorized these
issuances.





Subsequent
to September 30, 2008, the Company issued an aggregate of 3,775,000 shares of
common stock for consulting services valued at $216,200. The common stock was
issued in place of cash payments, and was valued between $0.056 and $0.068 per
share, based on the closing market prices on the date the board of directors
authorized these issuances.





Item 3.  Defaults Upon Senior
Securities





N/A




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





N/A





Item
5.  Other Information





N/A





Item
6.  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





SIGNATURES





Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.




Dated:
April 9, 2009


SANSWIRECORP.By:
      /s/ Jonathan LeinwandJonathan
      Leinwand, Chief Executive Officer (Principal Executive
      Officer)


29