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 June 30, 2010




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


For the
transition period from ____________ to _____________





Commission
file number 001-32509





SANSWIRE
CORP.


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






Delaware
            88-0292161(State
      or other jurisdictionof
      incorporation or organization)
            (IRS Employer
      Identification No.)




17501
Biscayne Blvd, Suite 430


Aventura,
Florida 33160


(Address
of principal executive offices)





(786)
288-0717


(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 xNo o





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files).


Yes xNo  o





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 filero
            Accelerated
      fileroNon-accelerated
      filer    o
            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 oNo x





As of
August 12, 2010, there were 306,661,084 shares of the issuer's common stock
issued and outstanding.










TABLE OF
CONTENTS





PagePART I - FINANCIAL
      INFORMATIONItem
      1.  Financial Statements.
            
            
            3Item
      2.  Management's Discussion and Analysis of Financial Condition
      andResults
      of Operations.
            
            
            19Item
      3.  Quantitative and Qualitative Disclosures About Market
      Risk.
            
            
            22Item
      4.  Controls and Procedures.
            
            
            22PART
      II - OTHER INFORMATIONItem
      1.  Legal Proceedings.
            
            
            23Item
      1A. Risk Factors.
            
            
            24Item
      2.  Unregistered Sales of Equity Securities and Use of
      Proceeds.
            
            
            24Item
      3.  Defaults Upon Senior Securities.
            
            
            24Item
      4.  (REMOVED AND RESERVED)
            
            
            24Item
      5.  Other Information.
            
            
            24Item
      6.  Exhibits.
            
            
            25





2




PART
I - FINANCIAL INFORMATION





Item 1. Financial
Statements.





SANSWIRE
CORP. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED BALANCE SHEETS




JUNE
      30,
              2010
            
            
            DECEMBER
      31, 2009ASSETSCURRENT
      ASSETSCash
      and cash equivalents
            
            $
            238,293
            
            
            $
            12Restricted
      cash
            
            
            25,000
            
            
            
            —Accounts
      receivable – related party
            
            
            100,000
            
            
            
            —Inventories
            
            
            1,545,490
            
            
            
            1,545,490Current
      assets from discontinued operations
            
            
            6,406
            
            
            
            6,406TOTAL
      CURRENT ASSETS
            
            
            1,915,189
            
            
            
            1,551,908Deposits
            
            
            11,150
            
            
            
            11,150Intangible
      assets, net of accumulated amortization of $1,533,775
            
            
            1,695,225
            
            
            
            2,179,574TOTAL
      NONCURRENT ASSETS
            
            
            1,706,375
            
            
            
            2,190,724TOTAL
      ASSETS
            
            $
            3,621,564
            
            
            $
            3,742,632LIABILITIES
      AND STOCKHOLDERS’ DEFICITLIABILITIESCURRENT
      LIABILITIESAccounts
      payable (including $352,588 and $396,625  due to joint venture
      partner at June 30, 2010 and December 31, 2009)
            
            $
            4,578,558
            
            
            $
            4,220,167Notes
      payable
            
            
            7,630,613
            
            
            
            7,391,718Accrued
      expenses and other liabilities (including $2,185,000 due to joint venture
      partner at June 30, 2010 and December 31, 2009)
            
            
            3,393,012
            
            
            
            3,311,025Derivative
      liabilities
            
            
            2,553,948
            
            
            
            1,406,665Current
      liabilities from discontinued operations
            
            
            1,387,406
            
            
            
            1,387,406TOTAL
      CURRENT LIABILITIES
            
            
            19,543,537
            
            
            
            17,716,981TOTAL
      LIABILITIES
            
            
            19,543,537
            
            
            
            17,716,981COMMITMENTS
      AND CONTINGENCIESSTOCKHOLDERS'
      DEFICITCommon
      stock, $.00001 par value, 500,000,000 shares authorized;302,926,418
      and 263,040,586 shares issued and outstanding
            
            
            3,030
            
            
            
            2,631Additional
      paid-in capital
            
            
            122,974,179
            
            
            
            120,114,115Series
      E Preferred stock, $.001 par value, 100,000 shares
    authorized;100,000
      shares issued and outstanding:
            
            
            100
            
            
            
            100Additional
      paid-in capital - Series E Preferred stock
            
            
            625,894
            
            
            
            625,894Accumulated
      deficit
            
            
            (139,525,176
            )
            
            
            (134,717,089
            )TOTAL
      STOCKHOLDERS' DEFICIT
            
            
            (15,921,973
            )
            
            
            (13,974,349
            )TOTAL
      LIABILITIES AND STOCKHOLDERS' DEFICIT
            
            $
            3,621,564
            
            
            $
            3,742,632


See
accompanying notes to condensed consolidated financial statements
  3


SANSWIRE
CORP.  AND SUBSIDIARIES


CONDENSED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


(Unaudited)





THREE
      MONTHS ENDED
            
            
            SIX
      MONTHS ENDEDJUNE
      30,
            
            
            JUNE
      30,2010
            
            
            2009
            
            
            2010
            
            
            2009REVENUES
      – related party
            
            $
            250,000
            
            
            $
            —
            
            
            $
            250,000
            
            
            $
            —COST
      OF REVENUES
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —GROSS
      MARGIN
            
            
            250,000
            
            
            
            —
            
            
            
            250,000
            
            
            
            —EXPENSESPayroll
      and related taxes
            
            
            150,654
            
            
            
            142,902
            
            
            
            247,947
            
            
            
            260,336Consulting
      fees
            
            
            646,080
            
            
            
            661,470
            
            
            
            1,079,336
            
            
            
            754,629Officers'
      and directors' stock based compensation
            
            
            1,143,000
            
            
            
            2,900,530
            
            
            
            1,467,546
            
            
            
            2,900,530Amortization
            
            
            242,175
            
            
            
            565,075
            
            
            
            484,350
            
            
            
            565,075Research
      and development
            
            
            150,000
            
            
            
            —
            
            
            
            150,000
            
            
            
            —General
      and administrative
            
            
            85,928
            
            
            
            124,141
            
            
            
            149,068
            
            
            
            245,632TOTAL
      EXPENSES
            
            
            2,417,837
            
            
            
            4,394,118
            
            
            
            3,578,247
            
            
            
            4,726,202LOSS
      FROM OPERATIONS
            
            
            (2,167,837
            )
            
            
            (4,394,118
            )
            
            
            (3,328,247
            )
            
            
            (4,726,202
            )OTHER
      INCOME (EXPENSE)Gain
      on extinguishment of debt
            
            
            16,788
            
            
            
            —
            
            
            
            16,788
            
            
            
            —Change
      in fair value of derivative liabilities
            
            
            (1,822,501
            )
            
            
            (2,206,573
            )
            
            
            (1,147,283
            )
            
            
            (2,136,154
            )Interest
      expense, net
            
            
            (105,447
            )
            
            
            (698,705
            )
            
            
            (349,345
            )
            
            
            (886,798
            )NET
      OTHER INCOME (EXPENSE)
            
            
            (1,911,160
            )
            
            
            (2,905,278
            )
            
            
            (1,479,840
            )
            
            
            (3,022,952
            )LOSS
      FROM CONTINUING OPERATIONS
            
            
            (4,078,997
            )
            
            
            (7,299,396
            )
            
            
            (4,808,087
            )
            
            
            (7,749,154
            )NET
      LOSS
            
            $
            (4,078,997
            )
            
            $
            (7,299,396
            )
            
            $
            (4,808,087
            )
            
            $
            (7,749,154
            )WEIGHTED
      AVERAGE NUMBER OF COMMON SHARES OUTSTANDINGBASIC
      and DILUTED
            
            
            285,677,475
            
            
            
            205,852,582
            
            
            
            275,358,110
            
            
            
            195,688,165LOSS
      PER SHARE FROM CONTINUING OPERATIONSBASIC
      and DILUTED
            
            $
            (0.01
            )
            
            $
            (0.04
            )
            
            $
            (0.02
            )
            
            $
            (0.04
            )NET
      LOSS PER SHAREBASIC
      and DILUTED
            
            $
            (0.01
            )
            
            $
            (0.04
            )
            
            $
            (0.02
            )
            
            $
            (0.04
            )




See
accompanying notes to condensed consolidated financial statements




4




SANSWIRE
CORP. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT


FOR
THE SIX MONTHS ENDED JUNE 30, 2010


(Unaudited)




COMMON STOCKADDITIONALPAID-INDescription
            
            SHARES
            
            
            AMOUNT
            
            
            CAPITALBALANCE,
      DECEMBER 31, 2009
            
            
            263,040,586
            
            
            $
            2,631
            
            
            $
            120,114,115Shares
      issued for cash
            
            
            6,443,827
            
            
            
            64
            
            
            
            486,973Shares
      issued for settlement of debt
            
            
            9,800,000
            
            
            
            98
            
            
            
            556,139Shares
      issued for services
            
            
            23,642,005
            
            
            
            237
            
            
            
            1,804,156Cost
      of raising capital
            
            
            —
            
            
            
            —
            
            
            
            (15,800
            )Fair
      value of vested options issued for officers’ and directors’
      compensation
            
            
            —
            
            
            
            —
            
            
            
            28,596Net
      loss
            
            
            —
            
            
            
            —
            
            
            
            —BALANCE,
      JUNE 30, 2010
            
            
            302,926,418
            
            
            $
            3,030
            
            
            $
            122,974,179




(continued)





See
accompanying notes to consolidated financial statements




5





SANSWIRE
CORP.  AND SUBSIDIARIES (continued)


CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' DEFICIT


FOR
THE SIX MONTHS ENDED JUNE 30, 2010


(Unaudited)




SERIES
      E PREFERRED STOCKADDITIONAL
            
            
            
            
            
            TOTALPAID-IN
            
            
            ACCUMULATED
            
            
            STOCKHOLDERS'Description
            
            SHARES
            
            
            AMOUNT
            
            
            CAPITAL
            
            
            DEFICIT
            
            
            DEFICITBALANCE,
      DECEMBER 31, 2009
            
            
            100,000
            
            
            $
            100
            
            
            $
            625,894
            
            
            $
            (134,717,089
            )
            
            $
            (13,974,349
            )Shares
      issued for cash
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            487,037Shares
      issued for settlement of debt
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            556,237Shares
      issued for services
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            1,804,393Cost
      of raising capital
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (15,800
            )Fair
      value of vested options issued for officers’ and directors’
      compensation
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            28,596Net
      loss
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (4,808,087
            )
            
            
            (4,808,087
            )BALANCE,
      JUNE 30, 2010
            
            
            100,000
            
            
            $
            100
            
            
            $
            625,894
            
            
            $
            (139,525,176
            )
            
            $
            (15,921,973
            )





See
accompanying notes to consolidated financial statements




6




SANSWIRE
CORP. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


FOR
THE SIX MONTHS ENDED JUNE 30,


(Unaudited)




2010
            
            
            2009CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      loss
            
            $
            (4,808,087
            )
            
            $
            (7,749,154
            )Adjustments
      to reconcile net loss to net cash used by operating
      activities:Amortization
      of debt discount
            
            
            —
            
            
            
            66,776Amortization
      of intangible asset
            
            
            484,350
            
            
            
            565,075Stock
      based compensation
            
            
            1,804,393
            
            
            
            1,950,725Cost
      of raising capital
            
            
            (15,800
            )
            
            
            —Fair
      value of vested options
            
            
            28,596
            
            
            
            1,707,780Interest
      expense on convertible notes payable
            
            
            213,895
            
            
            
            280,087Change
      in fair value of derivative liabilities
            
            
            1,147,283
            
            
            
            2,136,154Fair
      value of modification of warrants
            
            
            —
            
            
            
            443,305Increase
      in assets and liabilities:Accounts
      receivable
            
            
            (100,000
            )
            
            
            —Inventories
            
            
            —
            
            
            
            (1,110,700
            )Accounts
      payable
            
            
            760,626
            
            
            
            602,023Accrued
      expenses and other liabilities
            
            
            235,988
            
            
            
            83,602NET
      CASH USED IN OPERATING ACTIVITIES
            
            
            (248,756
            )
            
            
            (1,024,327
            )CASH
      FLOWS FROM INVESTING ACTIVITIESDeposits
            
            
            —
            
            
            
            (5,400
            )NET
      CASH USED IN INVESTING ACTIVITIES
            
            
            —
            
            
            
            (5,400
            )CASH
      FLOWS FROM FINANCING ACTIVITIESPayments
      on notes payable
            
            
            —
            
            
            
            (25,411
            )Proceeds
      from notes and loans payable
            
            
            —
            
            
            
            140,000Proceeds
      from sale of common stock
            
            
            487,037
            
            
            
            1,019,000NET
      CASH PROVIDED BY FINANCING ACTIVITIES
            
            
            487,037
            
            
            
            1,133,589NET
      INCREASE IN CASH AND EQUIVALENTS
            
            
            238,281
            
            
            
            103,862CASH
      AND EQUIVALENTS – BEGINNING OF PERIOD
            
            
            12
            
            
            
            4,809CASH
      AND EQUIVALENTS – END OF PERIOD
            
            $
            238,293
            
            
            $
            108,671SUPPLEMENTAL
      DISCLOSURESCash
      paid during the period for:Interest
            
            $
            —
            
            
            $
            2,903NON-CASH
      INVESTING AND FINANCING ACTIVITIES:Shares
      issued for accounts payable
            
            
            402,237
            
            
            
            13,031Shares
      issued for accrued expenses
            
            
            154,000
            
            
            
            43,750Convertible
      note payable for restricted cash
            
            
            25,000
            
            
            
            —Conversion
      of notes payable to common stock
            
            
            —
            
            
            
            484,774Non-cash
      equity-warrant valuation and intrinsic value of beneficial conversion
      associated with convertible notes
            
            
            —
            
            
            
            28,060Preferred
      stock for accrued expenses
            
            
            —
            
            
            
            440,607Preferred
      stock for accounts payable
            
            
            —
            
            
            
            185,387





See
accompanying notes to condensed consolidated financial statements




7




SANSWIRE
CORP. AND SUBSIDIARIES


NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(UNAUDITED)





NOTE
1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES





NATURE OF
OPERATIONS





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 surveillance sensor suites and advanced
seamless wireless broadband capabilities 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 (High Altitude Platform) and HALEs (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 feet for durations
of 30 days or more.  The Company is focused on the further
development of the SKYSat and development and construction of the STS-111
Lighter than air (LTA) Mid Altitude Long Endurance (MALE) Unmanned Aerial
Vehicle (UAV) platform for providing surveillance and reconnaissance
capabilities.





BASIS OF
PRESENTATION





The
accompanying unaudited condensed consolidated financial statements of Sanswire
Corp. and Subsidiaries have been prepared in accordance with accounting
principles generally accepted in the United States of America for interim
financial information and pursuant to the requirements for reporting on
Form 10-Q and Regulation S-X for scaled disclosures for smaller reporting
companies. Accordingly, they do not include all the information and footnotes
required by accounting principles generally accepted in United States of America
for complete financial statements. However, such information reflects all
adjustments (consisting solely of normal recurring adjustments), which are, in
the opinion of management, necessary for the fair presentation of the
consolidated financial position and the consolidated results of operations.
Results shown for interim periods are not necessarily indicative of the results
to be obtained for a full fiscal year.





The
condensed consolidated balance sheet information as of December 31, 2009 was
derived from the audited consolidated financial statements included in the
Company's Annual Report on Form 10-K filed with the SEC on April 2, 2010. These
interim financial statements should be read in conjunction with that
report.





The
Company applied the provision of Financial Accounting Standards Board (“FASB”)
ASC 810-10. “Consolidation of Variable Interest Entities (revised December
2003)” (“FIN 46R”) to its investment in Sanswire-TAO.  Under ASC 810,
a variable interest entity (“VIE”) is subject to consolidation if the total
equity investment at risk is not sufficient to permit the entity to finance its
activities without additional subordinated financial support provided by any
parties, including equity holders.  As of September 30, 2009, the
Company determined that that consolidation of Sanswire-TAO was
appropriate.  Inter-company accounts and transactions have been
eliminated in consolidation.





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 $4,808,087 and used cash in operating activities of
$248,756 for the six months ended June 30, 2010, and had a working capital
deficit of $17,628,348 and a stockholders’ deficit of $15,921,973 at June
30, 2010.  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 for the balance of 2010.




8





Additional
cash will still be needed to support operations. Management believes it can
continue to raise capital from various funding sources, which will be sufficient
to sustain operations at its current level through December 31,
2010. 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.  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.





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
SEC Staff is also considering recommending that the SEC authorize and institute
proceedings to revoke the registration of Company’s securities pursuant to
Section 12(j) of the Exchange Act (also see note 9).





CASH AND
CASH EQUIVALENTS





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





REVENUE
RECOGNITION





The
Company sells Lighter Than Air (LTA) Unmanned Aerial Vehicles. The Company
recognizes revenue for such sales when delivery has and the following criteria
have been met: delivery has occurred, the price is fixed and determinable,
collection is probable, and persuasive evidence of an arrangement
exists.   The Company recognized $250,000 in revenue for the period
ended June 30, 2010 and no revenue for the period ended June 30,
2009.





ACCOUNTS
RECEIVABLE





Trade and
other accounts receivable are reported at face value, less any provisions for
uncollectible accounts considered necessary. Accounts receivable primarily
includes trade receivables from customers and in connection with the sale of a
50% interest in a SkySAT.





INVENTORIES





Inventories
consist of work in progress related to the Company's consolidated joint venture
Sanswire-TAO.





INCOME
TAXES





Income
taxes are computed under the provisions of the Financial Accounting Standards
Board (FASB) ASC 740, “Accounting for Income Taxes”.  ASC 740
specifies the use of 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.




9




VALUATION
HIERARCHY





FASB ASC
820, “Fair Value Measurements”, establishes a valuation hierarchy for disclosure
of the inputs to valuation used to measure fair value. This hierarchy
prioritizes the inputs into three broad levels that reflect the degree of
subjectivity necessary to determine measurements, as follows.  Level 1
inputs are quoted prices (unadjusted) in active markets for identical
assets or liabilities.  Level 2 inputs are quoted prices for similar
assets and liabilities in active markets or inputs that are observable for the
asset or liability, either directly or indirectly through market corroboration,
for substantially the full term of the financial instrument.  Level 3
inputs are unobservable inputs based on the Company’s own assumptions used to
measure assets and liabilities at fair value.  A financial asset or
liability’s classification within the hierarchy is determined based on the
lowest level input that is significant to the fair value
measurement.





The
following table provides the assets and liabilities carried at fair value
measured on a recurring basis as of June 30, 2010 (unaudited):





Total CarryingValue
      at
            
            
            Fair
      Value Measurements at June 30, 2010June
      30, 2010
            
            
            (Level
      1)
            
            
            (Level
      2)
            
            
            (Level
      3)Cash
      and cash equivalents
            
            $
            238,293
            
            
            $
            238,293
            
            
            $
            —
            
            
            $
            —Restricted
      cash
            
            
            25,000
            
            
            
            25,000Derivative
      liabilities
            
            
            2,553,948
            
            
            
            —
            
            
            
            —
            
            
            
            2,553,948





The
derivative liabilities are measured at fair value using quoted market prices and
estimated volatility factors, and are classified within Level 3 of the valuation
hierarchy. There were no changes in the valuation techniques during the three
ended June 30, 2010.





FAIR
VALUE OF FINANCIAL INSTRUMENTS





Financial
instruments, including cash, deposits, 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 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
used in the diluted net loss per share calculation 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
June 30, 2010, the shares outstanding would be 377,009,350.   As
of August 12, 2010, we had 306,661,084 shares of our common stock outstanding.
The Company is obligated under various existing agreements, options and warrants
to issue additional shares of our common stock.





IMPAIRMENT
OF LONG-LIVED ASSETS





The
Company follows FASB ASC 360, "Accounting for the Impairment of Long-Lived
Assets." ASC 360 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.




10





INTANGIBLE
ASSETS





Intangible
assets are related to the Company's consolidated joint venture Sanswire-TAO (see
Note 6).  Intangible assets with finite lives are amortized over their
estimated useful lives, which are three years for patents and intellectual
property.  In addition to amortization, intangible assets are tested
at least annually for impairment, or whenever events or changes in circumstances
indicate that the carrying amount should be assessed.  An asset is
considered impaired if its carrying amount exceeds the future net cash flow the
asset is expected to generate. If an asset is considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the asset exceeds its fair value.  The Company generally
measures fair value by considering sales prices for similar assets or by
discounting estimated future net cash flows from such assets using a discount
rate reflecting the Company's average cost of capital.





DERIVATIVE
FINANCIAL INSTRUMENTS





The
Company does not use derivative instruments to hedge exposures to cash flow,
market or foreign currency risks.  The Company evaluates all of its
financial instruments to determine if such instruments are derivatives or
contain features that qualify as embedded derivatives.  For derivative
financial instruments that are accounted for as liabilities, the derivative
instrument is initially recorded at its fair value and is then re-valued at each
reporting date, with changes in the fair value reported in the condensed
consolidated statements of operations.  For stock-based derivative
financial instruments, the Company uses the Black-Scholes option pricing model
to value the derivative instruments at inception and on subsequent valuation
dates.  The classification of derivative instruments, including
whether such instruments should be recorded as liabilities or as equity, is
evaluated at the end of each reporting period.  Derivative instrument
liabilities are classified in the balance sheet as current or non-current based
on whether or not net-cash settlement of the derivative instrument could be
required within 12 months of the balance sheet date.





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 ASC 718 effective January 1, 2006, and for all
share-based payments granted based on the requirements of ASC 718. The Company
accounts for stock option and warrant grants issued and vesting to non-employees
in accordance with ASC 505: "Accounting for Equity Instruments that are Issued
to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or
Services” and ASC 505 “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.
Stock-based compensation expense recognized under ASC 718 for the periods ended
June 30, 2010 and 2009 were $1,804,393 and $1,950,725,
respectively.





NOTE
2. DISCONTINUED OPERATIONS





The
Company decided to close several of its operations relating to its telecom and
wireless activities during 2007 and has presented certain activities as
discontinued operations as of June 30, 2010.




11




The
Company has the following assets and liabilities from its discontinued
operations on its consolidated balance sheet as of June 30, 2010 (unaudited) and
December 31, 2009:





JUNE
      30, 2010 (Unaudited)
            
            Telecom
            
            
            GlobeTelWireless
            
            
            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, 2009
            
            Telecom
            
            
            GlobeTelWireless
            
            
            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





NOTE
3. SKYSAT SALE




On April
20, 2010, the Company and Global Telesat Corp. (“GTC”), a 4.6% shareholder of
the Company, entered into an agreement whereby GTC purchased a 50% interest in
the Company’s SkySat Mid Altitude, Lighter than Air (LTA), Unmanned Aerial
Vehicle (UAV) platform.  The Company is required to utilize the
Purchase Price to complete the requisite development work so that the Airship
may be tested and demonstrated to potential customers.





The
Company has agreed immediately to deliver the current Airship to a destination
and facility designated by GTC.  Within three days of delivery of the
Airship, GTC was required to pay 1/5th of the
purchase price with additional payments of an equal amount each at 30-day
intervals. The Company received a deposit of $50,000 on March 25, 2010 which was
applied as a payment as of June 30, 2010. As of June 30, 2010 the Company has
booked the transaction as revenue of $250,000 and to date has received
$150,000.   The remaining balance of $100,000 is carried as
accounts receivable.





The
Company has granted to GTC, upon the payment in full of the Purchase Price, a
first lien and security interest in the Airship and all remedies of a secured
creditor under the Uniform Commercial Code. The Company also granted GTC the
option to acquire the remaining 50% of the Airship for an amount equal to 3
times the amount paid for the initial 50% interest.  Upon exercising
such option, GTC will be required to pay 1/3 of the option price within ten
business days and two additional payments 1/3 each at 30-day
intervals.  The option expires December 31, 2010.





NOTE
4. ACCRUED EXPENSES AND OTHER LIABILITIES





Accrued
expenses and other liabilities consisted of the following:





June
      30,
              2010
            
            
            December
31,
              2009Payroll
      liabilities
            
            $
            1,089,066
            
            
            $
            1,007,079Professional
      fees
            
            
            118,946
            
            
            
            118,946Due
      to Joint Venture Partner
            
            
            2,185,000
            
            
            
            2,185,000ACCRUED
      EXPENSES AND OTHER LIABILITIES
            
            $
            3,393,012
            
            
            $
            3,311,025




12




NOTE
5. NOTES PAYABLE





Obligations
at June 30, 2010 and December 31, 2009 were as follows:





June
      30,
              2010
            
            
            December
      31,
              2009Notes
      payable
            
            $
            5,997,030
            
            
            $
            5,997,030Convertible
      notes payable
            
            
            28,500
            
            
            
            —Accrued
      interest
            
            
            1,605,083
            
            
            
            1,394,688NOTES
      PAYABLE
            
            $
            7,630,613
            
            
            $
            7,391,718





NOTES
PAYABLE





Notes
payable are made up of two separate notes.





As of
June 30, 2010, a balance of $4,997,130 remains payable to an unrelated third
party on an unsecured promissory note with no formal terms of repayment on the
first note.  The Company has accrued interest at a rate of 7% per annum,
which totals $1,337,444 from inception to June 30, 2010.





As of
June 30, 2010, a balance of $999,900 remains payable to a different unrelated
third party on an unsecured promissory note with no formal terms of repayment on
the second note.  The Company has accrued interest at a rate of 7% per
annum, which totals $267,141 from inception to June 30, 2010.





CONVERTIBLE
PROMISSORY NOTE





On April
1, 2010 the Company entered into a subscription agreement with an accredited
investor. The Company sold $28,500 of the Company’s 7% Convertible Debentures,
which are convertible into shares of the Company’s common stock at $.075 per
share pursuant to the following terms. The funds were lent for the purpose of
settling amounts due to the Internal Revenue Service.  If the Company
is unable to settle the debt in full, then the funds shall be returned to
investor.   The proceeds related to this investment are being
held in escrow and are classified on the Company’s condensed consolidated
balance sheet as Restricted cash.





NOTE
6.  INVENTORIES





Inventories
are related to the Company's consolidated joint venture Sanswire-TAO (see Note
7).  Inventories are stated at the lower of cost or market. Cost is
determined principally on a first-in-first-out average cost
basis.  Inventories consist of the following at:





June
      30,
              2010
              (unaudited)
            
            
            December
      31, 2009Work
      in process
            
            $
            1,545,490
            
            
            $
            1,545,490Total
      inventories
            
            
            1,545,490
            
            
            
            1,545,490





NOTE
7.  JOINT VENTURE AND INTANGIBLE ASSETS





On June
3, 2008, the Company restructured a previous agreement with TAO Technologies
GmbH and Professor Bernd Kroplin. The new agreement called for the establishment
of a new 50/50 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.  The agreement required TAO
Technologies and Kroplin to transfer the patents and intellectual property of
TAO Technologies and Kroplin in the United States to Sanswire-TAO for a payment
of $3,229,000.





On June
3, 2008, the Company accounted for the transaction as a purchase of assets and
recognized a $3,229,000 Intangible Asset related to the intellectual property,
including existing patents. The Company has made cash and stock payments of
$1,044,000 through June 30, 2010 and the remaining balance of $2,185,000 due for
the investment is included in accrued expenses as of June 30, 2010 and December
31, 2009 (See Note 4).




13




The
Company determined that the intangible assets have a definite life equal to the
remaining life of the patent, which was through March 3, 2012, and accordingly,
is subject to amortization using that life or 40 months, which is $80,725 per
month. During the normal process of testing for an intangible impairment, the
Company updated its ASC 360 analysis as of the end of December 2009 and
determined there were no cash flows associated with the Company’s intangible
assets.  The Company has determined that the appropriate method of
determining if any impairment has occurred was to assess the stated value for
the intangible assets, as described above.





NOTE 8.  DERIVATIVE
LIABILITIES





Derivative
instruments are carrieded on the balance sheet at fair value. Changes in
the fair value of derivatives are recorded each period in current earnings or
other comprehensive income.





The fair
value of derivative liabilities was determined using the Black-Scholes option
pricing model with the following assumptions:





June
      30,
              2010
            
            
            December
      31,
              2009Warrants:Risk-free
      interest rate
            
            
            0.18
      – 1.00
            %
            
            
            0.14
      – 1.45
            %Expected
      volatility
            
            
            10
      - 184
            %
            
            
            10
      - 168
            %Expected
      life (in years)
            
            
            0.42
      – 3.00
            
            
            
            0.08
      – 2.92Expected
      dividend yield
            
            
            —
            
            
            
            —Fair
      value:Warrants
            
            $
            2,553,948
            
            
            $
            1,406,665





The
risk-free interest rate was based on rates established by the Federal
Reserve.  In 2009, the Company’s expected volatility was based upon
the historical volatility for its common stock.  The expected life of
the warrants was determined by the expiration date of the
warrants.  The expected dividend yield was based upon the fact that
the Company has not historically paid dividends, and does not expect to pay
dividends in the future.





NOTE
9. CONTINGENCIES





In the
ordinary conduct of our business, the Company is subject to periodic lawsuits,
investigations and claims. Although the Company cannot predict with certainty
the ultimate resolution of lawsuits, investigations and claims asserted against
us, the Company does not believe that any currently pending legal proceeding or
proceedings to which we are a party or of which any of our property is subject
will have a material adverse effect on our business, results of operations, cash
flows or financial condition. As of June 30, 2010, the Company had the following
material contingencies:





Securities and Exchange
Commission





On
September 28, 2006, the Company received a formal order of investigation from
the Securities and Exchange Commission (“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 SEC
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.




14




On May 2,
2008, the SEC filed a lawsuit in the United States District Court for the
Southern District of Florida against GlobeTel Communications Corp. 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
such amendment did not add any new defendants. The Company has been vigorously
defending itself in this action.





Hudson Bay Fund LP et
al.





Hudson
Bay Fund LP and Hudson Bay Overseas Fund Ltd. filed an action against the
Company relating to the warrants attached to a Subscription Agreement between
those entities and the Company. The Hudson Bay entities are seeking to reprice
the warrants, increase the number of shares they can purchase pursuant to the
warrants, certain equitable remedies, and unspecified damages. The Company has
retained outside counsel and has filed an answer and affirmative defenses in the
case. The Company intends to vigorously defend the action, but the outcome of
the action cannot be predicted.





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. An Answer and Counterclaim had been interposed on both of these
actions.





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. This case has been disposed of by the
Supreme Court of the State of New York.  The case was disposed of on
September 12, 2007.





Tsunami Communications v.
GlobeTel





On March
3, 2006, Civil Action File No. 06-A-02368-5 was filed in Superior Court for
Gwinnett County Georgia.  A purported shareholder of a company from
whom GlobeTel purchased assets is seeking to receive shares of our common stock
that they believe that they are entitled to as their pro-rata share of shares
paid for the asset. We have asserted affirmative defenses and the trial of this
matter was held in November 2009. We are waiting for a ruling from the
Court.





NOTE
10. COMMON STOCK TRANSACTIONS





During
the six month period ended June 30, 2010, the Company issued an aggregate of
39,885,832 shares of common stock for cash, debt, board compensation, and
consulting agreements. Of the shares issued, 6,443,827 shares were issued for
cash and 19,500,000 shares, or 48.9% were issued to insiders and affiliates as
restricted securities under an exemption provide by Section 4(2) of the
Securities Act of 1933 and/or Regulation D, Rule 506, promulgated under the
Securities Act of 1933. The common stock issued was valued at prices ranging
from $0.044 to $0.105 per share, based on the closing market prices on the date
the board of directors authorized the issuances. Subsequent to June 30,
2010, the Company issued an aggregate of 3,734,666 shares of common stock
primarily for cash.




15





NOTE
11. STOCK OPTIONS AND WARRANTS





STOCK
OPTIONS




During
the six months ended June 30, 2010, the Company issued 700,000 options to
acquire common stock to its former CEO and Board member.  The Company
recorded $28,596 of compensation expense related to these options to acquire
common stock in the six months ended June 30, 2010, respectively.





The fair
value of the options granted during the six months ended June 30, 2010 were
determined using the Black-Scholes option pricing model with the following
assumptions: 1.02% average risk-free interest rate; 152% expected volatility;
three year expected term, and 0% dividend yield.





Employee
options vest according to the terms of the specific grant and expire from 2 to
3 years from date of grant. As of June 30, 2010, all options issued and
outstanding have fully vested. Stock option activity as of June 30, 2010 was as
follows:





Number
      of Options
              (in
      shares)
            
            
            Weighted
      Average Exercise PriceOutstanding
      at December 31, 2009
            
            
            38,042,499
            
            
            $
            .298Options
      Granted
            
            
            700,000
            
            
            
            .075Options
      Exercised
            
            
            —
            
            
            
            —Options
      Expired
            
            
            (5,536,945
            )
            
            
            (.213
            )Outstanding
      at June 30, 2010
            
            
            33,205,554
            
            
            $
            .081





The
following table summarizes information with respect to stock options outstanding
as of June 30, 2010:




Options Outstanding
              
              Options ExercisableRange of Exercise
      Prices
              
              Number of
                Shares
              
              
              WeightedAverage
                ExercisePrice
              
              WeightedAverage
                RemainingContractual
                Life(in years)
              
              Number of
                Shares
              
              
              WeightedAverage
                ExercisePrice$ 0.045 to $0.36
              
              33,205,554
              
              $
              0.081
              
              1.70
              
              33,205,554
              
              $
              0.08133,205,554
              
              
              
              
              
              
              33,205,554
 WARRANTS





The
following table summarizes the activity with respect to Outstanding stock
purchase warrants for the six months ended June 30, 2010:








Warrants
              Class
      A
            
            
            Warrants
              Class
      B
            
            
            WeightedAverageExercisePriceOutstanding
      at December 31, 2009
            
            
            18,933,804
            
            
            
            15,651,411
            
            
            $
            0.258Warrants
      Granted
            
            
            3,338,951
            
            
            
            3,078,424
            
            
            
            0.252Warrants
      Expired
            
            
            (62,606
            )
            
            
            (62,606
            )
            
            
            (0.252
            )Outstanding
      at June 30, 2010
            
            
            22,210,149
            
            
            
            18,667,229
            
            
            $
            0.257





The
aggregate intrinsic value of 33,205,554 options and 22,210,149 Class A and
18,667,229 Class B warrants outstanding and exercisable as of June 30, 2010 was
$12,261,976. The aggregate intrinsic value for the options is calculated as the
difference between the price of the underlying awards and quoted price of the
Company’s common shares for the options that were in-the-money as of June 30,
2010. At June 30, 2010, all warrant shares were vested. Therefore
there is no unamortized cost to be recognized in future
periods.





NOTE
12. PREFERRED STOCK





On May 3,
2009, the Board of Directors approved the creation of a Series E Preferred
Stock.  The terms of the Series E Preferred Stock were subsequently
amended on May 14, 2009. The Series E Preferred Stock, as amended, does not pay
dividends but each holder of Series E Preferred Stock shall be entitled to 21.5
votes for each share of common stock that the Series E Preferred Stock shall be
convertible into.  The Series E Preferred Stock, as amended, has a
conversion price of $0.105 and a stated value of $6.26.  Each share of
Series E Preferred Stock is convertible, at the option of the holder, into such
number of shares of common stock of the Company as determined by dividing the
Stated Value by the Conversion Price.  The Series E Preferred Stock
has no liquidation preference.





The
Company also cancelled all the authorized shares associated with the Series A,
B, C, and D of Preferred Stock.  As of June 30, 2010, the Company has
100,000 shares of Series E Preferred Stock outstanding.




16




NOTE
13. INCOME TAXES





The
Company has federal and state net operating loss (NOL) carryforward, 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
14. SUBSEQUENT EVENTS





The
Company has evaluated subsequent events from the balance sheet
date.  The following material subsequent event was as
follows:





On July
8, 2010, the Company announced that it purchased a new 172,000 cubic foot
temporary hangar facility in Easton, Maryland.  The Company also
announced that the hangar was completed on August 5, 2010.  The
purchase price for the new hangar was $94,692.




17





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 report on Form 10-K for the year ended December 31,
2009.





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.





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.




18




On
September 22, 2008, we effected a name change to Sanswire Corp. in recognition
of the entity that contained our sole business focus. Thus, moving forward from
September 22, 2008, 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 (High Altitude Platform)
and HALEs (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 month period ended June 30, 2010 and
2009.





COMPARISON
OF THREE MONTHS ENDED JUNE 30, 2010 AND 2009





REVENUES.
The Company had revenue related to sale of a 50% interest in the Company’s
SkySAT airship of $250,000 for the three months ended June 30, 2010 and no
revenue for the three months ended June 30, 2009.





COST OF
REVENUE. The Company had no cost of sales for the three months ended June 30,
2010 and 2009.





GROSS
MARGIN. The Company had revenue related to sale of 50% of the Company’s SkySAT
airship of $250,000 for the three months ended June 30, 2010 and no revenue for
the three months ended June 30, 2009.





OPERATING
EXPENSES. Our operating expenses consist primarily of payroll and related taxes,
professional and consulting services, expenses for executive and administrative
personnel and insurance, telephone and communications,
facilities expenses, travel and related expenses, and other general
corporate expenses. Our operating expenses for the three month period ended June
30, 2010 were $2,417,837 compared to the three month period ended June 30, 2009
which had operating expenses of $4,394,118 a decrease of $1,976,281 or
45.0%. The decrease was primarily due to a $1,757,530 decrease in noncash
compensation for previous board members and a $322,900 decrease for amortization
of intangible assets.





During
each of the three month periods ended June 30, 2010 and 2009, Sanswire and its
subsidiaries incurred payroll tax liabilities during the normal course of
business at each payroll cycle. 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
accordingly, contacted the IRS  to make arrangement to pay any taxes
due, which is currently estimated to be at least $200,000 including liabilities
associated with the Company’s subsidiaries that are classified in discontinued
operations. The Company may be subject to penalties and interest from the
IRS.





LOSS FROM
OPERATIONS. We had an operating loss of $2,167,837 for the three month period
ended June 30, 2010 as compared to an operating loss of $4,394,118 for the three
month period ended June 30, 2009, primarily due to decreased operating expenses
as described above.





OTHER
INCOME (EXPENSE). We had net other income totaling $1,911,160 during the three
month period ended June 30, 2010 compared to net other expense of $2,905,278
during the three month period ended June 30, 2009. This decrease was due
primarily to the non cash charges related to the change in the fair value of
derivatives.





Interest
expense for the three month period ended June 30, 2010 was $105,447 compared to
$698,705 for the three month period ended June 30, 2009. Interest expense
decrease was primarily due to a decrease in notes payable.





LOSS FROM
DISCONTINUED OPERATIONS. During the three month periods ended June 30,
2010 and 2009, we had no activity related to our discontinued operations.
See note 2 in the financial statements for more information regarding the
discontinued operations.




19





NET LOSS.
We had a net loss of $4,078,997 in the three month period ended June 30, 2010
compared to $7,299,396 in the three month period ended June 30, 2009. The
decrease in net loss is primarily attributable to the decrease in the operating
expenses as discussed above.





COMPARISON
OF SIX MONTHS ENDED JUNE 30, 2010 AND 2009





REVENUES.
The Company had revenue related to sale of a 50% interest in the Company’s
SkySAT airship of $250,000 for the six months ended June 30, 2010 and no revenue
for the six months ended June 30, 2009.





COST OF
REVENUE. The Company had no cost of sales for the six months ended June 30, 2010
and 2009.





GROSS
MARGIN. The Company had revenue related to sale of 50% of the Company’s SkySAT
airship of $250,000 for the six months ended June 30, 2010 and no revenue for
the six months ended June 30, 2009.





OPERATING
EXPENSES. Our operating expenses consist primarily of payroll and related taxes,
professional and consulting services, expenses for executive and administrative
personnel and insurance, telephone and communications, facilities expenses,
travel and related expenses, and other general corporate expenses. Our operating
expenses for the six month period ended June 30, 2010 were $3,578,247 compared
to the six month period ended June 30, 2009 which had operating expenses of
$4,726,202 a decrease of $1,147,955 or 24.3%. The decrease was primarily
due to a $1,432,984 decrease in noncash compensation for previous board members
and a decrease of $80,725 for amortization of intangible assets.





During
each of the six month periods ended June 30, 2010 and 2009, Sanswire and its
subsidiaries incurred payroll tax liabilities during the normal course of
business at each payroll cycle. 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
accordingly, contacted the IRS to make arrangement to pay any taxes due, which
is currently estimated to be at least $200,000 including liabilities associated
with the Company’s subsidiaries that are classified in discontinued operations.
The Company may be subject to penalties and interest from the IRS.





LOSS FROM
OPERATIONS. We had an operating loss of $3,328,247 for the six month period
ended June 30, 2010 as compared to an operating loss of $4,726,202 for the six
month period ended June 30, 2009, primarily due to charges associated with stock
and employee option issuances as described above, including lower operating
costs and reductions of our various programs.





OTHER
INCOME (EXPENSE). We had net other expenses totaling $1,479,840 during the six
month period ended June 30, 2010 compared to $3,022,952 for the six month period
ended June 30, 2009. This decrease was due primarily to the non cash charges
related to the change in the fair value of derivatives.





Interest
expense for the six month period ended June 30, 2010 was $349,345 compared to
$886,796 for the six month period ended June 30, 2009. Interest expense decrease
was primarily due to a decrease in notes payable.





LOSS FROM
DISCONTINUED OPERATIONS. During the six month periods ended June 30,
2010 and 2009, we had no activity related to our discontinued operations.
See note 2 in the financial statements for more information regarding the
discontinued operations.





NET LOSS.
We had a net loss of $4,808,087 in the six month period ended June 30, 2010
compared to $7,749,154 in the six month period ended June 30, 2009. The decrease
in net loss is primarily attributable to the decrease in the operating expenses
as discussed above.





LIQUIDITY
AND CAPITAL RESOURCES





ASSETS.
At June 30, 2010, the Company had total assets of $3,621,564 compared to total
assets of $3,742,632 as of December 31, 2009.





Current
assets at June 30, 2010, were $1,915,189 compared to $1,551,908 at December 31,
2009 which were primarily comprised of $238,293 in cash and cash equivalents and
$1,545,490 in work in process/inventory.





The
Company had $1,695,225 in intangible assets as of June 30, 2010 compared to
$2,179,574 as of December 31, 2009.




20




LIABILITIES.
At June 30, 2010, the Company had total liabilities of $19,543,537 compared to
total liabilities of $17,716,981 as of December 31, 2009.  The
increase of $1,826,556 was principally due to $1,147,283 in changes associated
with the derivative liabilities (see note 8 of the financial
statements.)





CASH
FLOWS. Our cash used in operating activities in the six months ended June 30,
2010 was $248,756 compared to $1,024,327 for the comparative prior year 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 during the six months ended June 30, 2010 was
$487,037 principally from the proceeds of the sale of common stock, as compared
to $1,133,589 for the six months ended June 30, 2009.





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 $4,808,087 and used cash in operating activities of
$248,756 for the six months ended June 30, 2010, and had a working capital
deficit of $17,628,348 and a stockholders’ deficit of $15,921,973 at June
30, 2010.  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 for the balance of 2010.





Additional
cash will still be needed to support operations. There is no guarantee that we
will be able to continue to raise capital from existing funding sources, which
will be sufficient to sustain operations at its current level through December
31, 2010. Further, if budgeted sales levels are not achieved, 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.  The
Company will need to periodically seek new capital investment to provide cash
for operations until such time that operations provide sufficient cash flow to
cover expenditures.





Subsequent
to June 30, 2010, the Company has raised $532,500 from investors; additionally
there is not adequate funding to cover the Company’s working capital deficit or
the operating loss for the six month period ended June 30, 2010 of approximately
$4,808,087.





As
reflected in the accompanying financial statements, during the six month period
ended June 30, 2010 the Company had a net loss of $4,808,087 compared to a net
loss of $7,749,154 during the six month period ended June 30, 2009.
Consequently, there is an accumulated deficit of $139,525,176 at June 30, 2010
compared to $134,717,089 at December 31, 2009.





Off-Balance
Sheet Arrangements





We have
no significant off-balance sheet arrangements that have or are reasonably likely
to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that is material to our
stockholders.





Critical
Accounting Policies and Use of Estimates





Estimates





The
preparation of condensed 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.




21




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.





Recent
Accounting Pronouncements





There are
no recently issued accounting pronouncements that are yet effective that we
believe will have a material effect on our financial statements.





Item
3.  Quantitative and Qualitative Disclosures About Market
Risk





As a
“smaller reporting company” as defined by Regulation S-K, the Company is not
required to provide information required by this Item.





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 of Thomas Seifert, the Company’s Principal Executive Officer
and/or Chief Financial Officer (the “Reviewing Officers”), of the
effectiveness of the Company's disclosure controls and procedures as of June 30,
2010. Mr. Seifert has since resigned from such positions. 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 Officers concluded that as of June 30,
2010, the Company's disclosure controls and procedures were not effective to
ensure that information required to be disclosed by the Company in the reports
it files or submits under the Exchange Act is recorded, processed, summarized
and reported within the time periods specified in the Securities and Exchange
Commission's rules and forms.





Material
Weaknesses





Initially,
on May 4, 2007, the Company determined that the Company had ineffective
controls over revenue recognition.   On September 3, 2009, the
Company then also determined that it has not properly accounted for various
derivative liabilities resulting in this restatement.





We have
categorized our efforts to address our material weaknesses into two
phases.  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. 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, we have commenced to and continue to implement
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
  22




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 Quarter 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





In the
ordinary conduct of our business, the Company is subject to periodic lawsuits,
investigations and claims. Although the Company cannot predict with certainty
the ultimate resolution of lawsuits, investigations and claims asserted against
us, the Company does not believe that any currently pending legal proceeding or
proceedings to which we are a party or of which any of our property is subject
will have a material adverse effect on our business, results of operations, cash
flows or financial condition. As of June 30, 2010, the Company had the following
material 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 SEC filed a lawsuit in the United States District Court for the
Southern District of Florida against the Company and three former officers of
the Company, Timothy J. Huff, Thomas Y. Jimenez and Lawrence E. Lynch. The SEC
alleges, among other things, that the Company recorded $119 million in revenue
on the basis of fraudulent invoices created by Joseph Monterosso and Luis
Vargas, two individuals formerly employed by the Company who were in charge of
its wholesale telecommunications business.





The SEC
alleges that the Company violated Sections 5(a), 5(c), and 17(a) of the
Securities Act of 1933, as amended, Sections 10(b), 13(a), 13(b)(2)(A) and
13(b)(2)(B) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), and Rules 10b-5, 12b-20, 13a-1, 13a-11 and 13a-13 under the Exchange Act.
The SEC seeks as relief a permanent injunction, civil penalties, and
disgorgement with prejudgment interest. The Commission subsequently consolidated
this action with another pending action involving former officers of the
Company. The Commission has also moved to amend its complaint against the
Company to include additional allegations of wrongdoing beginning in 2002, which
such amendment does not add any new defendants. The Company has been vigorously
defending itself in this action.





Hudson Bay Fund LP et
al.





Hudson
Bay Fund LP and Hudson Bay Overseas Fund Ltd. filed an action in Supreme Court
of the State of New York, New York County (Case No.650366/09 against the
Company claiming declaratory judgment, specific performance, and breach of
contract relating to the warrants it acquired in connection with its
investment.  The Hudson Bay entities are seeking to reprice the
warrants, increase the number of shares they can purchase pursuant to the
warrants, certain equitable remedies, and unspecified damages. The Company has
retained outside counsel and has filed an answer and affirmative defenses in the
case. The Company intends to vigorously defend the action, but the outcome of
the action cannot be predicted.




23




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. An Answer and Counterclaim had been interposed on both of these
actions.





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. This case has been disposed of by the
Supreme Court of the State of New York. The case was disposed of on September
12, 2007.








Tsunami Communications v.
GlobeTel





On March
3, 2006, Civil Action File No. 06A-02368-5 was filed in Superior Court for
Gwinnett County Georgia.  A purported shareholder of a company from
whom GlobeTel purchased assets is seeking to receive shares of our common stock
that they believe that they are entitled to as their pro-rata share of shares
paid for the asset. We have asserted affirmative defenses and the trial of this
matter was held in November 2009. We are waiting for a ruling from the
Court.





Item
1A.  Risk Factors





As a
“smaller reporting company” as defined by Regulation S-K, the Company is not
required to provide information required by this Item.





Item
2.  Unregistered Sales of Equity Securities and Use of
Proceeds





During
the six month period ended June 30, 2010, the Company issued an aggregate of
39,885,832 shares of common stock for cash, debt, board compensation, and
consulting agreements. Of the shares issued, 19,500,000 shares, or 48.9% were
issued to insiders and affiliates as restricted securities under an exemption
provide by Section 4(2) of the Securities Act of 1933 and/or Regulation D, Rule
506, promulgated under the Securities Act of 1933. The common stock issued was
valued at prices ranging from $0.044 to $0.105 per share, based on the closing
market prices on the date the board of directors authorized the
issuances. Subsequent to June 30, 2010, the Company issued an aggregate of
3,734,666 shares of common stock primarily for cash.





During
the six months ended June 30, 2010, the Company issued 700,000 options to
acquire common stock to its former CEO and Board member.





The above
securities were offered and issued in a private placement transaction made in
reliance upon exemptions from registration pursuant to Section 4(2) under the
Securities Act of 1933 (the “Securities Act”) and/or Rule 506 promulgated under
the Securities Act.  The shareholders are accredited investors as
defined in Rule 501 of Regulation D promulgated under the Securities
Act.





Item
3.  Defaults Upon Senior Securities





None.




Item
4.  REMOVED AND RESERVED





Not
applicable.





Item
5.  Other Information





None.




24





Item
6.  Exhibits




Exhibits
            
            DescriptionExhibit 31.1
            
            Certification
      of the Principal Executive Officer and Chief Financial Officer pursuant to
      Section 302 of theSarbanes-Oxley
      Act of 2002Exhibit 32.1
            
            Certification
      of the Principal 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 200210.1
            
            Purchase
      Agreement, dated April 20, 2010, by and between Sanswire Corp. and Global
      Telesat Corp.  (1)10.2
            
            Employment
      Agreement between Sanswire Corp. and Glenn Estrella
  (2)





(1)
              Incorporated
      by reference to the Form 8-K Current Report filed with the Securities and
      Exchange Commission on April 27,
2010.


(2)
              Incorporated
      by reference to the Form 8-K Current Report filed with the Securities and
      Exchange Commission on June 24,
2010.




25




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.




SANSWIRECORP.Dated:
      August 13, 2010
              By:
              /s/ Glenn
      EstrellaName:
      Glenn Estrella,Title:  
      Title: Chief Executive Officer,Chief Financial Officer and
      Director(Principal Executive,Financial and Accounting
      Officer)




26